CA AB5 just made things a lot clearer, but also much stricter regarding how is legitimately considered a contractor vs. who is an employee. This new law (passed in Sept 2019) takes effect on January 1, 2020. ZümiFi is encouraging ALL clients to be aware of these new legal requirements, and understand now how this may (or may not) impact on their business…
This new law applies the ABC test to determine whether someone is an employee or not. In order to be accurately considered an independent contractor, ALL THREE conditions must be true as follows:
- The worker controls their work and is not under the direction of the hirer.
- The worker performs tasks that are outside the normal course of business for the hirer.
- The worker customarily performs these tasks not only for this hirer but for others as well and has established their own business doing so.
So, basically this means that you cannot treat someone as an independent contractor unless they have their own business providing these services, they are truly independent of you, and the services they perform are not core to your own business offerings.
There are lots of professionals (web designers, bookkeepers, attorneys, CPAs, etc) who will legitimately continue to be treated as independent contractors. But you’ll notice that these requirements are much stricter, and clearer so we know that many small businesses will no longer be able to continue treating contractors the same way. There are also a number of industries that very specifically are exempted from the ABC test, including insurance agents, lawyers, accountants, engineers and real estate agents amongst others. Perhaps your business can fall under an exemption.
The absolute most important thing all small business owners should do is to EDUCATE themselves about AB5, and how AB5 may or may not impact their business. ZümiFi strongly encourages all clients who are not clear on how this will impact their business to consult with an employment law attorney and/or an HR expert to fully understand how this affects future engagements.
Let us know if you need recommendations for these professionals.
ZümiFi has your back!