Here’s what employers need to know.
What happened? California’s Assembly Bill 5 (AB 5) is a new bill that was signed into law on September 10, 2019.
What changed? AB 5 codifies, clarifies and grants exemptions to the California Supreme Court’s 2018 Dynamex decision. In combination, AB 5 and Dynamex make it harder for companies to label workers as independent contractors.
Is AB 5 a federal law? No, AB 5 is only for California.
When does it start? The law takes effect on January 1, 2020.
How many independent contractors are there in California? There are 1-2 million individuals.
What does it mean for me? Your current independent contractors may be misclassified.
Are there any exceptions? Several professions won exemptions to AB 5, usually on the grounds that the independent contractors set or negotiate their own rates, communicate directly with customers, and make at least twice minimum wage. (Contact us to find out if the person performing work for you falls into one of the classifications.)
How do I know if it applies to me? The court established the “ABC” test. To avoid being considered an employee, a worker must:
The most difficult requirement to prove is “B”. Here are two scenarios that could apply to you.
Scenario 1 - You need someone to take care of administrative work for your office and want to pay them for the hours they work. You provide equipment necessary to complete the job and dictate the hours they should be at work.
Scenario 2 - The sink breaks in your office kitchen and you contact a plumber to come in to fix it.
Results: The administrative professional would not be classified as an independent contractor, but the plumber would be, due to these factors under the ABC test:
Remember: For someone to qualify for independent contractor status, they must meet A, B and C.
October 02, 2019
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