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California Assembly Bill 5- Are your workers employees or independent contractors?

By June 7, 2019June 13th, 2023No Comments

AB 5, Also known as the Gig Economy Bill passed by the California State Assembly on May 29, 2019. This bill will now move on to the State Senate. If passed by the Senate it will go before the Governor to be signed.

Under this bill many workers who are currently labeled as independent contractors will now be considered employees. This would make them subject to state labor laws. Additionally, employer would have to pay payroll taxes, provide benefits, overtime, minimum wage and worker’s compensation coverage.

The bill uses the “ABC” Test to determine if a worker is an employee or a contractor:

  1. Is that worker 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; AND
  2. That worker performs work that is outside the usual course of the hiring entities business; AND
  3. That worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.

The bill does exempt some professions. Those are: licensed insurance agents, certain licensed health care professionals, registered securities brokers, direct sales salesperson, real estate licensees, hairstylists and barbers, and those performing work under a contract for professional services. The bill would require the State Board of Barbering and Cosmetology to promulgate regulations for the development of a booth rental permit and a reasonable biennial fee upon workers providing specified hairstyling or barbering services.

What could this mean for your business? If you currently have “Independent Contractors” that you 1099 you need to apply the ABC Test as shown above or on the Employment Department’s webpage. If you can answer NO to A, B or C then, under AB5 that worker is considered and employee and you must have worker’s compensation coverage.

We have many markets for worker’s compensation coverage. Many of our carriers will apply a multi-policy discount to your business package policy if we write both your business package and worker’s compensation with the same carrier.

If you are concerned whether your workers are employee 1-800-AGENT2000.