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Avoid running afoul of CA’s shifting ‘independent contractor’ law

| Sep 21, 2020 | Wage & Hour Laws |

Few employment law issues have attracted the level of attention garnered by AB 5, California’s sweeping law targeting businesses that utilize independent contractors. Since being passed, the law has survived an onslaught of constructive criticism from negatively impacted workers and companies including gig workers such photographers, journalists, musicians, carpenters and gig companies such as Lyft and Uber.

While the law remains in effect, legislators in 2020 approved some changes, which were signed into law by Governor Gavin Newsom at the start of September. Here is an overview.

Where things stand now

AB-5, in its original form, carved out some job exceptions – types of roles for which businesses could use a looser definition of the term “independent contractor,” referred to as the Borello Test. These exceptions were quite limited, however, and included accountants, certain medical professionals, some direct salespeople, real estate professionals, insurance brokers, and others.

The recently signed legislation (AB 2257) adds a significant number of exemptions to AB 5. Additional types of jobs that, for now, may not require the strict ABC test when determining independent contractor status include:

  • Freelance writers, videographers, photographers or editors
  • Musicians and recording professionals (such as songwriters, producers and sound engineers)
  • Data aggregators
  • Home inspectors
  • Insurance professionals involved in risk management, underwriting inspections and other industry tasks
  • Professional foresters

Importantly, this new law also relaxes AB 5’s rules surrounding business-to-business relationships.

What to expect moving forward

Keep in mind the list of exemptions above is not exhaustive. Similarly, the law around worker classification is complex. Do not assume individuals with these types of job duties can be automatically considered independent contractors. In some cases, they still may not fulfill all the required criteria.

Remember the law could easily change. Despite the adoption of more business-friendly rules, AB 5 remains a burden for many, and will likely be shaped by future legislation.

When it comes to worker classification, the best defense is one that is preventative. Do the work beforehand. Commit the time and resources to ensure anyone you intend to use as an independent contractor fulfills the legal requirements of such a title. Doing so can help your business remain on the right side of the law, and avoid the costly penalties that may come with a misstep.  The attorneys at Duggan McHugh can guide you in navigating proper worker classification and independent contractor issues.