INDEPENDENT CONTRACTOR RULES OVERHAULED

Last year the California Legislature tried to abolish most independent contracting with enactment of the ABC Test in L.C. 2730.3. Facing outcries from employers and employees alike, the Legislature passed AB 2257 which expands and further defines the jobs exempted from the ABC Test. The bill went immediately into effect on September 4, 2020 when signed into law by Gov. Newsom. Per AB 2257, the 2019 enacted L.C. 2750.3 is repealed and replaced by:

a) L.C. 2775 (ABC Test): Reiterates the ABC Test is to be used in determining whether a worker was an independent contractor, unless the job qualifies for an exemption, in which case the Borello "control test" applies.

b) L.C. 2776 (Business-To-Business Exemption): ABC Test doesn't apply as between contracting businesses if the provider has: independent control of its work, services are not for the contracting businesses' clients directly, done per written contract, licensed if necessary, and maintains itself publicly as an independent business.

c) L.C. 2777 (Referral Agency Exemption): ABC Test doesn't apply if service provider has independent control of work performance, properly licensed product, done per written contract, services done under providers own name, established place of business, and provides own tools/supplies. Expands type of job referrals to include graphic and web designers, tutors, wedding planners, interpreter and translators; but specifically excludes high hazard industries per OSHA such as janitorial, trucking, transportation, and in-home care services.

d) L.C. 2778 (Professional Services Exemption): ABC Test doesn't apply if provider can negotiate rates, has required licenses, and maintains a separate business location. Includes marketers, travel agents, salon workers, fine artists, freelance photographers and writers (35 item cap eliminated).

e) L.C. 2779 to 2783 (Other Exemptions): Musicians, certain insurance industry jobs, home appraisers, relationships between two individuals providing service to a third party at a single event, and commercial fisherman. Also includes newspaper carriers, but only to 1/1/2023.

[COMMENT: The Dynamex/ABC Test survives but in a watered-down state and facing additional legal challenges. AB 2257 specifically did not exempt the trucking industry which has obtained a temporary stay order from the the ABC Test as violating the Commerce Clause of the U.S. Constitution; nor did the Bill exempt app-based employers like Lyft and Uber who will take their case to the voters this upcoming November in Proposition 22.]