Yes, yes. There’s a new law in town! Smart California businesses need to know about AB5 and be sure how this new law will impact their businesses. AB5 took effect as of January 1, 2020, and creates VERY strict definitions about who can be legitimately treated as a contractor.
We here at ZümiFi have a great tip – since we are all in the midst of preparing and filing 1099 forms for 2019, this is a perfect opportunity to check to see who we are issuing 1099 to and whether that vendor status will be impacted going forward based on the criteria of AB5. You are already preparing those 1099s, so why not put them to good use?
Here is some more information about the new ABC test that AB5 applies: A) The person 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. 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. Now note – ALL THREE MUST BE TRUE!
We find that many of our clients are most concerned about B as that is a very new criterion that has a direct impact. So you are likely okay with treating your bookkeepers, your web designers, your attorney, etc as legitimate independent contractors. But outside the usual course of your business? Whoa – that is a strong one. It’s also the reason why many are calling this the “Uber” law. Because AB5 means that drivers, who clearly perform work DIRECTLY within the core of Uber’s business must now all be treated as employees. These are big changes.
ZümiFi keeps sounding the alarm, and asking you to find out – how will this impact MY business? Why? Because it is smarter, faster and more cost-effective to prevent a problem before you have one. We want all of our clients to ensure that they make any necessary changes now.
So use this 1099 season to make sure you comply! If you need or desire to consult with an Employment Law attorney, ask us! We know some awesome folks who can definitely help you sort this out. If you need to set up payroll services because you now need to pay folks as employees instead of contractors, no worries! Give us a call and we’ll get you set up pretty quickly and easily. We have a variety of payroll services we can recommend, and we’ll help you get it all set up properly.
So know the law! Know how this applies to your business, and make sure you start 2020 out with a clear vision of how to comply with these new regulations.