Independent Contractors in California
• Bill AB5 requires businesses to use a three-part “ABC test” to determine if a worker is an employee or an independent contractor.
• The new law allows cities and the state to challenge a company’s worker classifications through legal action.
• A worker is considered an employee unless the business can prove that the worker meets all three conditions of the ABC test:
A: The person is free from the control and direction of the hiring entity as it relates to performance of the work, both under the contract for the performance of the work and in fact.
B: The person performs work that is outside the usual course of the hiring entity’s business.
C: The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Under AB5, several professions became exempt, under the following:
• professionals are able to set or negotiate their own rates
• communicate directly with customers,
• and make at least twice minimum wage.
Professions exempt include:
doctors, psychologists, dentists, podiatrists, insurance agents, stock brokers, lawyers, accountants, engineers, veterinarians, direct sellers, real estate agents, hairstylists and barbers, aestheticians, commercial fishermen, marketing professionals, travel agents, graphic designers, grant writers, fine artists, enrolled agents, payment processing agents, repossession agents and human resources administrators.