Instead of simply adding to the professional services exemption set forth under AB 5 for still photographers, photojournalists, freelance writers, editors, and newspaper cartoonists who had over 35 submissions in a year, AB 2257 replaces the prior exemption with broader language. AB 5 “2.0” – California Tweaks its Independent Contractor Ban, California Law Impacts All Categories of Independent Contractors – Not Just Gig Workers – What Your Business Needs to Do Now, AB 5 - California’s New Independent Contractor Law. California Assembly Bill 5 (AB5), popularly known as the “ gig worker bill,” is a piece of legislation signed into law by Governor Gavin Newsom in September 2019. This is a dramatic change, given that the previous business-to-business exemption excluded sole proprietorships. AB 2257 clarifies the exemption’s requirements and, in theory, allows more flexibility in how it may be applied. Borello. AB 5 entitles workers classified as employees to greater labor protections, such as minimum wage laws, sick leave, and unemplo This exemption for sole proprietors also includes services provided for certain single-engagement events, defined as stand-alone non-recurring events in a single location, or a series of events in the same location no more than once a week. Assembly Bill (AB) 5, recently signed into law, replaces the common law test with the ABC test to determine whether a worker is an employee or independent contractor in California. AB 2257 also adds requirements that the writer or photographer provide services under a contract that specifies in advance the rate of pay and intellectual property rights, and that the contractor not replace an employee performing the same work at the same volume. California has amended its independent contractor law to make more jobs and professions exempt from the “ABC” test that AB 5 codified last year. AB 5: Changing the Landscape for Independent Contractor Analysis Although the national media has largely focused on the effects on ride-hailing, … The trigger for that assessment is typically (though not always) the issuance of an arrangement that results in a form 1099. Initially, it appeared that the ABC Test would apply to all workers. AB 2257 … The individual customarily and regularly exercises discretion and independent judgment in the performance of the services. By Jennifer B. Rubin, Audrey Nguyen. AB 5 is a law passed by the California state legislature and signed into effect by California governor Gavin Newsom. Do AB 5 and Labor Code section 2750.3 require use of the ABC test in all situations? These changes create additional opportunities for individuals, especially those involved in translation/interpretation and the music industry, to remain independent contractors. California Assembly Bill 5 or AB 5 is a state statute that expands a landmark Supreme Court of California case from 2018, Dynamex Operations West, Inc. v. Superior Court. Also, the more detailed the directions and instructions given to th… No. Significantly, AB 2257 now empowers district attorneys to also enforce AB 5 – previously only the Attorney General and certain city attorneys possessed this power. This list includes recording artists, songwriters, lyricists, composers, proofers, managers of recording artists, record producers and directors, musical engineer and mixers, musicians engaged in the creation of sound recordings, vocalists, photographers working on recording photo shoots and related content, independent radio promotors, and any other individual engaged to render any creative, production, marketing, or independent music publicist services related primarily to the creation, marketing, promotion, or distribution of sound recordings or musical compositions. In addition, the writer or photographer must not perform the work primarily at the hiring entity’s business location, and may not be restricted from working for other hiring entities. Below is the new list of exempt occupations, services and businesses, with the changes and updates from AB 5’s original provisions highlighted in red. ). C. the worker is customarily engaged in an independent established trade, occupation, or business of the same nature as the work performed. This eliminates any potential argument that contracting entities must audit their contractors to ensure they have additional customers, easing burdens on California business. Recording artists, songwriters, lyricists, composers, proofers, managers of recording artists, record producers and directors, musical engineers, musicians engaged in creating sound recordings, vocalists, photographers working on album covers, and other press and publicity photos relating to recordings, and independent radio promoters; Musicians or musical groups for the purpose of a single-engagement live performance event; Freelance translators, content contributors, advisors, narrators, cartographers, producers, copy editors, and illustrators; Persons who provide underwriting inspections, premium audits, risk management or loss-control work for the insurance industry; Persons engaged in conducting international and cultural exchange visitor programs; Competition judges with specialized skill sets; Digital content aggregators who serve as licensing intermediaries for digital content; Specialized performers hired to teach a master class for no more than one week; and, Registered securities broker-dealer or investment adviser or their agents and representatives, Direct sales salesperson (per Section 650 of the Unemployment Insurance Code), Workers performing repossession services for repossession agencies. AB 2257 expands on those exemptions, as discussed further below. AB 5 defines what is a legitimate “business-to-business contracting relationship” and sets forth further requirements to determine whether a “business service provider” is a properly classified independent contractor (e.g., janitorial services, etc. Thus, these individuals must be paid the equivalent of minimum wage as well as any overtime premiums for the duration of the services performed. This update disregards the submission requirement and allows for more individuals to fall under the exemption. It becomes effective immediately. However, AB 2257 explicitly states that film and television unit production crews, including still photographers and cinematographers and works of live or recorded performances for audiovisual works, are not exempt. AB 5 would provide that for purposes of the provisions … Additionally, musicians and musical groups performing single-engagement live performance events are also exempt unless: (1) the group is performing as a symphony orchestra, at a theme park or amusement park, or a musician is performing in a musical theater production; (2) the group is an event headliner for a performance taking place in a venue location with more than 1,500 attendees; (3) the group is performing at a festival that sells more than 18,000 tickets per day. AB 2257 removes that submission ceiling. AB5 restricts who can be considered an independent contractor, which is why it is important to understand what AB5 is and how it affects business owners and independent contractors. AB 5 is a bill the Governor signed into law in September 2019 addressing employment status when a hiring entity claims that the person it hired is an independent contractor. Attorney advertising. AB 5 intended to codify the California Supreme Court’s recent Dynamex decision, which significantly narrowed the definition of independent contractor – applying a very strict “ABC” test. Governor Newsom signed the amendment into law on September 4, 2020. However, under AB 5, which became effective January 1, 2020, the California Legislature both codified the main holding of Dynamex and set forth various exemptions from this test – any position or occupation that fell under an exemption would instead be subject to the common law, multi-factor Borello test to determine whether an individual may be considered an employee or independent contractor. Accordingly, businesses may see an increase in litigation from district attorneys seeking to prosecute misclassification issues. Additionally, all of the below factors must be met for the exemption to apply to the above listed “professional services”: AB 5’s “business-to-business” exemption had been used by certain freelancers and sole proprietors operating in California as a way to avoid the “ABC” Test. Audrey Nguyen is a Mintz attorney who works on counseling, employment litigation, and other regulatory matters. AB 5 and the Independent Contractor. Cathy Atkins, JD CAMFT Deputy Executive Director The Therapist January/February 2020. In that case, the court held that most workers are employees, ought to be classified as such, and the burden of proof for classifying individuals as independent contractors belongs to the hiring entity. Under the ABC test, a worker is considered an employee and not an independent contractor, unless the hiring entity satisfies all three of the following conditions: The worker 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; In light of the significant modifications AB 2257 places on the exemptions provided by AB 5, companies are strongly encouraged to evaluate existing agreements with independent contractors and determine the impact of AB 2257 on their business practices, stay apprised of any other potential changes to the AB 5 framework moving forward, and monitor litigation in this area. While these additions broaden the reach of the referral agency exemption, AB 2257 specifies that the determination of whether an individual worker is an employee of the service provider or of the client to whom the services were provided is subject to the ABC test. The Mintz ELB group in California is available to assist your business in its AB 5 and AB 2257 compliance efforts and will continue to provide up to date analysis on laws and cases impacting the fast changing landscape of independent contractor classifications. For further information about these entities and DLA Piper's structure, please refer to the Legal Notices page of this website. Under AB 5 most independent contracting relationships will be assessed under the rigorous ABC test established by the California Supreme Court in Dynamex. AB 2257 modifies and expands the list of professions exempt from the “ABC” test to include additional … AB 5 also included over fifty categories of workers who were exempted from this 3-prong test and instead subject to the prior Supreme Court decision which established the Borello case multi-factor test. The service provider may also not be restricted from working for more than one entity. Behavioral Control:A worker is an employee when the business has the right to direct and control the work performed by the worker, such as when and where to work, what specific tools to use or where to purchase supplies and services. That is, the ABC test governs whether an individual is an employee of the contractor referred to for the provision of services or of the client to whom services were directly provided to. AB 5 is a bill the Governor signed into law in September 2019 addressing employment status when a hiring entity claims that the person it hired is an independent contractor. Otherwise, they may bring claims of failure to pay minimum wage or overtime, subjecting hiring entities to the relevant statutory penalties. We suggest that businesses conduct an immediate audit to determine whether any contracts are legitimately subject to reclassification in light of these amendments. Non-independent music publicists are also not exempt. ABC Test Exemptions. Signed by Governor Gavin Newsom in September 2019, Assembly Bill 5 (AB-5) redefines what constitutes an independent contractor in California, so that starting January 1, 2020, many gig economy workers will be eligible to receive a guaranteed hourly wage ($12), overtime pay, labor protections, and other benefits received by full-time employees. These changes primarily impact freelance writers, musicians, film support crews and visual artists, making it easier for companies to classify them as independent contractors. Up to now, you’ve probably made sure you’re adhering to the IRS classification rulesfor independent contractors, which are as follows: 1. With these amendments, roughly 75 professions or types of businesses are now exempt from the independent contracting test set out in AB 5, meaning employers are able to use the common law Borello test instead of the more restrictive “ABC” test to assess whether the workers are employees or independent contractors. Entities attempting to utilize this exception should ensure that interpreters they engage with have one of these certifications as part of the onboarding process. If the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which he or she rents business space. AB 2257 also adds new jobs as professional services subject to certain requirements. AB 5, which codifies the California Supreme Court’s ABC test for independent contractors as set forth in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, was signed into law by Governor Newsom on September 18, 2019 and will become effective on January 1, 2020. Under the ABC test, an individual providing services to an entity is presumed to be an employee unless the hiring entity can establish that: A. the worker is free from control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact Marketing, provided that the contracted work is original and creative in character and the result of which depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of or necessarily incident to any of the contracted work, Administrator of human resources (provided certain criteria are met), Services provided by an enrolled agent who is licensed by the United States Department of the Treasury, Payment processing agent through an independent sales organization, Still photographer or photojournalist who does not license content submissions to the putative employer more than 35 times per year (does not apply to motion picture work), Services provided by a freelance writer, editor, or newspaper cartoonist who does not provide content submissions to the putative employer more than 35 times per year. Worker status: employees and independent contractors. As the California Supreme Court held in Dynamex v. Superior Court, 4 Cal.5th 903 (2018), if a hiring entity can satisfy each of these prongs, the individual may be considered an independent contractor instead of an employee. It is now easy to identify whether a fitness trainer is an employee or an independent contractor. Learn more about this development by contacting any of these DLA Piper Employment partners in California: © 2021 DLA Piper. AB 5, Gonzalez. This is momentous because it establishes that nearly every fitness studio in California has employees, not independent contractors. Background: Dynamex and AB 5 A worker is more likely to be classified as an employee instead of an independent contractor. Ab 5 is the new statute that codifies the ABC test for classifying workers as employees or independent contractors. Before law school, Audrey worked as a government relations analyst. Tailor your perspective of our site by selecting your location and language below. The bill specifically exempts positions related to the creating, marketing, promoting, or distributing of sound recordings or musical compositions. Specifically, AB 2257 recasts AB 5’s professional services exemption, referral agency exemption, and business-to-business exemption, and additionally encompasses a number of specific occupations that now will fall outside the reach of the ABC test. Content contributors, advisors, producers, narrators, and cartographers have also been added to the exemption, again so long as their services are performed under a contract with the same requirements. We recommend that businesses continue to carefully assess vendor agreements moving forward to determine whether the contracting party falls within the confines of AB 5, as amended. Additionally, AB 2257, subject to certain requirements, provides exemptions for individuals engaged in underwriting inspections and other services for the insurance industry, manufactured housing salespersons, certain individuals engaged by international exchange visitor programs, and competition judges. DLA Piper is a global law firm operating through various separate and distinct legal entities. However, under AB 5, which became effective January 1, 2020, the California Legislature both codified the main holding of Dynamex and set forth various exemptions from this test – any position or occupation that fell under an exemption would instead be subject to the common law, multi-factor Borello test to determine whether an individual may be considered an employee or independent contractor. AB 5, if enacted into law, would codify the “ ABC Test ” for employee status adopted in the California Supreme Court’s 2018 Dynamex v. Superior Court decision, and would thus further hinder the efforts of businesses to use independent contractors. Jennifer B. Rubin is a Mintz Member who advises clients on employment issues like wage and hour compliance. Under this test the hiring entity must be able to prove all three of the following: The hiring entity does not … AB 2257 recast the statutory scheme and added over fifty more exemptions from the ABC Test into the California Labor Code.
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