{"id":7997,"date":"2019-09-24T11:56:17","date_gmt":"2019-09-24T18:56:17","guid":{"rendered":"https:\/\/higgslaw.local\/?p=7997"},"modified":"2019-09-24T11:57:54","modified_gmt":"2019-09-24T18:57:54","slug":"california-passes-ab-5-making-it-more-difficult-for-businesses-to-classify-workers-as-independent-contractors","status":"publish","type":"post","link":"https:\/\/higgslaw.com\/california-passes-ab-5-making-it-more-difficult-for-businesses-to-classify-workers-as-independent-contractors\/","title":{"rendered":"California Passes AB-5 Making It More Difficult for Businesses to Classify Workers as Independent Contractors"},"content":{"rendered":"

On September 18, 2019, California Governor Gavin Newsom signed Assembly Bill 5 (AB-5), which drastically limits many employers\u2019 ability to classify workers as independent contractors.<\/p>\n

AB-5 codifies the California Supreme Court\u2019s holding in it Dynamex Operations W. v. Superior Court<\/em> (2018) 4 Cal.5th 903 [232 Cal.Rptr.3d 1, 416 P.3d 1] (\u201cDynamex<\/em>\u201d), which changed the way employers classified independent contractors under California\u2019s IWC wage orders from the longstanding Borello <\/em>test (an eleven-factor test which primarily focused on an employers\u2019 control over a worker) to a much stricter \u201cABC\u201d test.<\/p>\n

Under the \u201cABC\u201d test, a person providing labor is presumed to be an employee of a hiring entity unless the employer proves:<\/p>\n

    \n
  1. The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.<\/li>\n
  2. The person performs work that is outside the usual course of the hiring entity\u2019s business.<\/li>\n
  3. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.<\/li>\n<\/ol>\n

    Although Dynamex <\/em>only applied to misclassification claims brought under California\u2019s IWC wage orders, AB-5 expands the application of the \u201cABC\u201d test to all claims brought under the California Labor Code and Unemployment Insurance Code.<\/p>\n

    The bill contains numerous exceptions for occupations and contracting arrangements including lawyers, doctors, dentists, psychologists, veterinarians, architects, private investigators, engineers, accountants, securities broker dealers, investment advisors, insurance brokers, commercial fisherman, repossession agents, and real estate agents.\u00a0 Those exempted are subject to classification under the former Borello<\/em> test.<\/p>\n

    Further, independent contractors providing certain types of \u201cprofessional services\u201d (including, marketing, human resources, travel agents, graphic designers, graphic writers, fine artists, photography, freelance writers, editors, newspaper cartoonists, licensed estheticians, licensed electrologists, licensed manicurists, licensed barbers, and licensed cosmetologists) will not be subject to the \u201cABC\u201d test if they meet a separate, six-factor test focusing largely on whether they operate an independent business.<\/p>\n

    AB-5 also provides exceptions for construction subcontractors, \u201cbona fide business-to-business contracting relationships\u201d, tow-truck drivers, and referral agencies (i.e., \u201ca business that connects clients with service providers that provide graphic design, photography, tutoring, event planning, minor home repair, moving, home cleaning, errands, furniture assembly, animal services, dog walking, dog grooming, web design, picture hanging, pool cleaning, or yard cleanup\u201d).<\/p>\n

    Businesses in California that use independent contractors should immediately contact an attorney before January 1, 2020 (AB-5\u2019s effective date) to evaluate whether their current contractor relationships are subject to an exception or pass the \u201cABC\u201d test.\u00a0 If a contractor does not meet the \u201cABC\u201d test and is not subject to an exception, an attorney will be able to assist in developing a strategy to transition current independent contractors to W-2 employees, with the least amount of risk.<\/p>\n","protected":false},"excerpt":{"rendered":"

    On September 18, 2019, California Governor Gavin Newsom signed Assembly Bill 5 (AB-5), which drastically limits many employers\u2019 ability to classify workers as independent contractors. AB-5 codifies the California Supreme Court\u2019s holding…<\/p>\n","protected":false},"author":41,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[9],"tags":[],"coauthors":[],"class_list":["post-7997","post","type-post","status-publish","format-standard","hentry","category-attorney-articles","attorney-derek-w-paradis"],"acf":[],"yoast_head":"\nCalifornia Passes AB-5 Making It More Difficult for Businesses to Classify Workers as Independent Contractors | Higgs Fletcher & Mack\u00ae<\/title>\n<meta name=\"description\" content=\"On September 18, 2019, California Governor Gavin Newsom signed Assembly Bill 5 (AB-5), which drastically limits many employers\u2019 ability to classify\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/higgslaw.com\/california-passes-ab-5-making-it-more-difficult-for-businesses-to-classify-workers-as-independent-contractors\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"California Passes AB-5 Making It More Difficult for Businesses to Classify Workers as Independent Contractors | Higgs Fletcher & Mack\u00ae\" \/>\n<meta property=\"og:description\" content=\"On September 18, 2019, California Governor Gavin Newsom signed Assembly Bill 5 (AB-5), which drastically limits many employers\u2019 ability to classify\" \/>\n<meta property=\"og:url\" content=\"https:\/\/higgslaw.com\/california-passes-ab-5-making-it-more-difficult-for-businesses-to-classify-workers-as-independent-contractors\/\" \/>\n<meta property=\"og:site_name\" content=\"Higgs Fletcher & Mack\u00ae\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/higgslaw\/\" \/>\n<meta property=\"article:published_time\" content=\"2019-09-24T18:56:17+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2019-09-24T18:57:54+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/higgslaw.com\/wp-content\/uploads\/2019\/06\/facebook-image.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"630\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Derek W. 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