California Revises its Independent Contractor Laws
Sept. 10, 2020
As a majority of businesses and a good number of employees are aware, California adopted Assembly Bill (AB) 5 on January 1, 2020, also known as the "ABC Test", which sets the default standard to determine whether independent contractors should be treated as employees of a hiring entity. Under the "ABC Test" a worker may only be classified as an independent contractor if it meets all of the following elements: (A) the worker is free from control and direction of the hiring entity in connection with performing the work, both under contract and in fact, (B) the worker performs work outside the usual course of the hiring entity’s business, and (C) the worker customarily engages in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. (See our previous blog post for additional details on the "ABC Test"). AB-5 also contained numerous exemptions from the "ABC Test" for specific industries, including insurance brokers, physicians/surgeons, attorneys, architects, licensed accountants, real estate licensees, hairstylists, and barbers to name a few.
On September 4, 2020, Governor Gavin Newsom signed Assembly Bill (AB) 2257, which substantially revised and further clarified California's independent contractor laws, while providing for additional exemptions to AB-5. Per AB-2257, additional industries which are exempt from the requirements of the "ABC Test" include recording artists, songwriters, lyricists, licensed landscape architects, real estate appraisers, home inspectors, people who provide underwriting inspections and other services for the insurance industry, to name a few.
What does this mean? If an industry or employer falls under one of the exemptions listed under AB-5 or AB-2257, it does not mean they can automatically proceed with classifying their workers as independent contractors. They still have to undergo an analysis under what's known as the "Borello Test" to determine whether their workers are deemed to be employees vs. independent contractors under California law.
The attorneys at Simonian & Simonian, PLC are highly experienced with these types of issues and are happy to provide consultations to potential clients who feel they have been misclassified by their employers.