California Changes Independent Contractor Test for Some Gig Workers

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On September 4, 2020, California Governor Gavin Newsom signed legislation (AB 2257) expanding the exemptions to the state’s ABC test. Using this test, employers can determine whether an individual is an employee or an independent contractor under California Labor Code, Unemployment Insurance Code, and Industrial Welfare Commission wage orders.

The ABC Test

Under the ABC test, paid workers must be classified as employees—not independent contractors—unless the hiring entity can demonstrate all of the following:

(A) They are free from the control and direction of the hiring entity regarding the work they perform, both in practice and under their contract. For example, they make their own schedule, do not answer to a supervisor, perform duties according to their own custom.

(B) They perform work that is outside the usual course of the hiring entity’s business. For example, if they are a baker, but for a company that does not specialize in baking.

(C) They are customarily engaged in an independently established trade, occupation, or business of the same nature as that of the work performed for the hiring entity. For example, they mostly earn income by baking, and that’s exactly what they’re doing for the hiring entity.

AB 2257 Exemptions

With the signing of AB 2257, the law now exempts certain occupations from the ABC test and instead applies the multifactor Borello test, which considers several independent factors in determining employment status.

AB 2257 Exemptions

Workers exempt from ABC but considered under Borello include:

  • Musicians or musical groups for single-engagement live performance events, under specific terms and conditions.
  • Individual performance artists presenting original, creative work that is unique to only their invention, imagination, or talent.
  • Still photographers, photojournalists, videographers, or photo editors under a written contract with specific terms along with the services they provide to digital content aggregators.
  • Fine artists, freelance writers, translators, editors, content contributors, advisors, narrators, cartographers, producers, copy editors, illustrators, or newspaper cartoonists under a written contract with specific terms.
  • People who provide underwriting inspections and other services for the insurance industry.
  • Manufactured housing salespersons, subject to certain obligations.
  • International exchange visitor program workers.
  • Consultants providing substantive advice that requires their discretion and independent judgment, which is based on their own expertise of a particular subject or field of study.
  • Animal services related to daytime and nighttime pet care including pet boarding.
  • Competition judges with specialized skills.
  • Licensed landscape architects.
  • Specialized performers teaching master classes.
  • Registered professional foresters.
  • Real estate appraisers and home inspectors.
  • Feedback aggregators.
Other Changes Under AB 2257

In addition to creating the list of exemptions above, AB 2257 also created two other changes to the previous law under AB 5. These are:

  • Creating an exemption for business-to-business relationships between two or more sole proprietors. Instead, worker classification is now determined by California Labor Code § 2750.5 and by Borello.
  • Revising referral agency exemption criteria and clarifying that referrals for services do not include high hazard industry services and janitorial, delivery, courier, transportation, trucking, agricultural labor, retail, logging, in-home care, or construction services other than minor home repair.
Classification Reminders

Keep in mind that the ABC test and the Borello test both assume that the worker is an employee. The hiring entity must prove that the worker is an independent contractor to make that classification.

Under the ABC test, if a hiring entity cannot demonstrate any part of the three-part test then the worker is not an independent contractor.

Under the Borello test, no single factor determines whether a worker is an employee or an independent contractor. Instead, courts consider all potentially relevant factors on a case-by-case basis. These include the nature of the work, the overall arrangement between the parties, and the purpose of the law.

Let’s Talk

We encourage employers to visit the HR Support Center to learn more about worker classifications. There you’ll find guides, checklists, videos, and more to help you properly classify your workers.

Need a little extra support? No matter your situation, SDP has layers of HR support that can help. Learn more about our HR Support Services here. And don’t forget to follow us on FacebookTwitter, and LinkedIn for even more business tips & news!

Photo by Gustavo Fring from Pexels

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