California Passes Law Setting New Standards For Independent Contractor Classification
On September 18, California Gov. Gavin Newsom signed a bill into law that creates new, more strenuous standards for classifying workers as independent contractors in the state. The law goes into effect January 1, 2020.
It updates the California Labor Code to include an “ABC” test for determining whether someone is an employee or an independent contractor of a company. The ABC test presumes that a worker is an employee unless the hiring entity establishes the following three conditions:
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.
If a worker does not meet all three criteria, they must be classified as an employee. The law does include exceptions for the ABC test if certain qualifications are met. These exceptions include doctors, dentists and veterinarians; lawyers, architects, engineers, private investigators and accountants; securities broker-dealers and investment advisers; insurance agents; human resources administrators; travel agents; marketers, graphic designers, grant writers, fine artists, and certain photographers or photojournalists; and certain freelance writers and editors.
For more on the California law and what businesses should know, click here.