More about AB 5
This is a continuation of my prior blog on AB 5 which you can read here.
Aside from the Business-to-Business exemption from the strict ABC Test, there are numerous other exemptions available for specific types of jobs. These include:
Licensed Professionals including insurance brokers, medical doctors, attorneys, accountants, architects, engineers, stock brokers and certain other licensed professionals are categorically exempt from the strict ABC Test when providing their professional services; their services are instead subject to the older, more flexible factors for determining employee versus independent contractor status (Labor Code Section 2750.3(b)).
Marketing professionals, HR specialists, travel agents, graphic designers, grant writers, and fine artists may work as independent contractors provided they:
have a business license (if they work in a city or county that requires a business license, which includes most cities in California),
negotiate their own rates of pay,
set their own hours generally,
are customarily engaged in the same type of work under contracts with various clients and/or hold themselves out as available to perform the same type of work for other clients, and
regularly exercise discretion and independent judgment in performing their services, among other requirements (Labor Code Section 2750.3(c) generally and in particular sub paragraphs (2)(B)).
Freelance journalists, writers, photojournalists, and photographers may work as independent contractors provided that they meets the general independent business owner requirements of the exemption listed above (including having a businesses license and doing similar work for other clients) and they do not make submissions to a single publication or hiring entity more than 35 times per year (Labor Code Section 2750.3(c) generally and in particular sub paragraphs (2)(B)(ix) and (x)).
Estheticians, barbers, cosmetologists, manicurists*, and certain other personal care professionals may work as independent contractors provided that they:
meet the general requirements listed above to establish themselves as true independent business owners
have an esthetician's or other appropriate license for their line of work,
set their own rates,
get paid directly by clients,
schedule their own appointments, and
have sole discretion over which clients to serve, among other requirements (Labor Code Section 2750.3(c) generally and in particular sub paragraph (2)(B)(xi))
*Manicurists are for now included in this list, however, they will be eliminated effective January 1, 2022, therefore, beauty salons should have plans in place to hire manicurists as employees no later than the end of 2021.
There are several other industry-specific exemptions including for contractors, fishermen, and others.
What Do I think of AB 5?
I'm often asked whether I think AB 5 is overall good or bad. My opinion is complicated. I'm fed up with seeing my home (the Bay Area) ravaged by gentrification, displacement, rising wealth inequality, and the like, much of it driven by Silicon Valley, so it's nice to see a rare instance where politicians take a bold pro-labor move, and act against the wishes of Big Tech. However, as an attorney for small businesses and nonprofits I have seen some headaches caused by the strict nature of the Dynamex ruling. The business-to-business exemption is helpful, however, there are still common situations where it's not practical to hire a worker as an employee, but the new laws weigh in favor of hiring that worker as an employee. One example is when one needs to hire workers on a short-term basis such as for a one-time event or to cover for another worker who is temporarily unavailable, and depending on the nature of the work and the profession of the specific worker, this arrangement may not be covered by an xemption in AB 5. So even with the many helpful nuanced exemptions provided by AB 5, there will still be some challenges for small employers.
When the Dynamex ruling was first issued there was talk about dramatically undermining it through legislation, so I was fearful that the Legislature would pass a new law to do exactly what Big Tech wanted and revert back to the old law that was much easier for larger companies to exploit. Despite Democratic majorities in both houses of the California Legislature and our new Democratic Governor, many of these Democratic politicians have ties to tech giants. So I feared there might be legislation that would set us back in terms of workers' rights. I think what we got is overall a big step in the right direction. However, I hope to see further court rulings and/or legislation providing greater nuance to employment law in favor of flexibility for smaller employers.
Final Notes
In conclusion, this blog post summarizes some key terms of various exemptions from the ABC Test, but it does not cover all exemptions (there are a lot, some quite industry-specific). Also, this blog only provides highlights of key requirements and it does not cover all of the requirements for each exemption discussed here. However, I've cited the Labor Code section for each exemption discussed in this blog so that you can look up all of the details in the actual law on the California Legislature’s website.
But the law is complicated stuff, and not everything you need to know will necessarily be clearly spelled out in the California Labor code. So I also recommend that you contact me to set up a consultation or speak with any other California attorney who is familiar with employment law before hiring someone as an independent contractor in California. An attorney can help you draft written agreements that clarify the terms of your relationships with independent contractors to reinforce the notion that a service provider is truly an independent contractor (and not your employee). This can protect small businesses and nonprofits from liability and expensive litigation in the event of a dispute.