2020 New Labor Laws – AB5 Exemptions

This year may turn out to be one for the record books when it comes to significant employment legislation in California.

One of the biggest new labor is AB5, which deals with  classification of Independent Contractor vs Employee. Many small business owners have operated their business through independent contractors. Mislabeling  employees as independent contractors rather than employees can bring about liabilities such as: employment taxes and penalties, and failure to provide many legal obligations owed to employees.

The ABC test is a guide for employers to follow in determining if a worker is considered an independent contractor or an employee. The employer is responsible for the making corrections to the employees work status.

ABC Test:

A. The worker 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 worker performs work that is outside the usual course of the hiring entity’s business; and

C. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

There are exceptions to this new law:

AB 5 Exemptions:

  • Specific occupation exemptions
  • Professional services exemption
  • Business-to-business exemption
  • Construction subcontractor exemption
  • Construction trucking exemption

Below is a link to the labor law which explains in depth the exceptions.

Link to law:

Bill Text – AB-5 Worker status: employees and independent …

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Ginny Kuhel

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