Employee or Independent Contractor?

Nibbling Around The Edges? California Continues To Make Changes To AB 5 AndThe ABC Test

From JDSupra, Benjamin Ebbink discusses the changes in to AB5 including changes to the general exceptions (bona fide business to business and referral agency exceptions) that are not specific to an industry or particular profession. Benjamin writes:

Mind Your Business-To-Business!

One of the more potentially expansive exemptions contained in AB 5 was the so-called “business-to-business” exemption that was designed to protect normal, legitimate contracting between two business entities from being subject to the ABC test. However, AB 5 required that 12 separate criteria had to be met in order to satisfy the exemption, and some of the criteria were quite difficult to meet, even for legitimate business contracting relationships.

AB 2257 makes a few changes to these specified criteria that, for some, may make it easier to satisfy.

First, the business-to-business exempt in AB 5 required that the business service provider be providing services to the contracting business rather than to customers of the contracting business. This proved difficult to satisfy for some contracting relationships where direct customer service was at issue. AB 2257 specifies that this requirement does not apply “if the service provider’s employees are solely performing the services under the contract under the name of the business service provider and the business service provider regularly contracts with other businesses.”

Second, AB 5 required that a business service provider “actually contracts” with other businesses and “maintains” a clientele without restriction from the hiring entity. AB 2257 loosens this requirement by instead requiring that the business service provider “can” contract with other businesses and maintain a clientele (but presumably does not have to be shown to “actually” do so).

Third, AB 2257 specifies that the contract with the business service provider (in addition to being in writing) must specify the amount of payment, including any applicable rate of pay and due date for payment.

Fourth, AB 2257 clarifies that a business service provider’s “business location” may include their residence.

Fifth, the existing business-to-business exemption requires that a business service provider provide its own tools, vehicles and equipment. AB 2257 specifies that this applies only when “consistent with the nature of the work” and does not include any proprietary materials that may be necessary to perform the work under the contract.

AB 2257 also specifies that the business-to-business exemption applies where a contractor is hired by a public agency or quasi-public corporation. In addition, AB 2257 clarifies that while this exemption test governs the relationship between two bona fide businesses, the determination of whether an individual worker is an employee or independent contractor of one of the two businesses is still governed by the ABC test.

Broadening “Referral Agency/Service Provider” Exemption?

AB 5 also enacted an exemption to relationships between “referral agencies” and “service providers” that meet certain specified criteria. AB 2257 makes some modest changes to these criteria in a manner that may make them easier to satisfy.

But more importantly, AB 2257 broadens the scope of individuals potentially included under this exemption. AB 5 limited the definition of “referral agency” to specified services. AB 2257 expands this list of services to also include consulting, youth sports coaching, caddying, wedding or event planning, services provided by wedding and event vendors, and interpreting services. But most significantly, AB 2257 changes this list of covered services from an “exclusive” list to a “non-exclusive” list (“including, but not limited to…”). This raises the possibility that other types of services not listed could be included in the referral agency/service provider exemption if they meet the specified requirements.

However, as the legislature giveth, the legislature taketh away. AB 2257 also specifies that the referral agency/service provider exemption does not apply to the following industries: janitorial, delivery, courier, transportation, trucking, agricultural labor, retail, logging, in-home care, construction services other than minor home repair, or high-hazard industries.

Read the full story at  Nibbling Around The Edges? California Continues To Make Changes To AB 5 AndThe ABC Test | Fisher Phillips – JDSupra

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