Employment Law Update: AB 2257 Part 2 - The Professional Services Exemption

This is a continuation of our blog series on AB 2257 and the exemptions it provides from the ABC test. (For an introduction to AB 2257 and the events exemption, check out our previous blog post.) In this post, we’ll be covering the professional services exemption, as detailed in Labor Code Section 2778. Nonprofits and small businesses which seek to form mutually and materially beneficial relationships with their hirees or hirers through an “independent contractor” classification can find this helpful.

The Professional Services Exemption 

The professional services exemption was first established by AB 5. More recently, AB 2257 clarified and expanded the exemption to include more occupations, which now include (but not limited to):

  • Marketing professionals who perform work that is original and creative in character and the result of which depends primarily on the invention, imagination, or talent of the individual or work that is an essential part of or necessarily incident to any of the contracted work.

  • Human Resource professionals who perform work that is varied and specially tailored to a client’s needs.

  • Travel agents who meet certain specifications.

  • Graphic designers.

  • Grant writers.

  • Fine artists who create works of art to be appreciated primarily or solely for their imaginative, aesthetic, or intellectual content, including drawings, paintings, sculptures, mosaics, works of calligraphy, works of graphic art, crafts, or mixed media.

  • Enrolled Agents licensed to practice before the IRS.

  • Those professionals who provide services as a freelance writer, translator, editor, copy editor, illustrator, or newspaper cartoonist provided, however that:

    • They work under a written contract that specifies:

      • the rate of pay, 

      • intellectual property rights, and 

      • Clearly defined payment timeline, 

    • Their services do not directly replace an employee who performed the same work at the same volume previously

    • The individual does not primarily perform the work at the hiring entity’s business location. (Labor Code Section 2778(a)(2)(J))

  • Services provided by an individual as a content contributor, advisor, producer, narrator, or cartographer for a journal, book, periodical, evaluation, other publication or educational, academic, or instructional work in any format or media may also be performed by an independent contractor under the same conditions as above for freelance writers, etc. (Labor Code Section 2778(a)(2)(K))

Additionally, the professional services exemption requires that if an individual will be considered an independent contractor for “professional services” then all of the following apply: 

  • The individual maintains a business location separate from the hiring entity (which can be their home).

  • The individual has a business license if the city (or county) where their business is located requires a business license. (Note that most cities in California require business owners, including freelancers, solopreneurs, etc. to have a business license if they have a business location, including a home office, in that city.)

  • The individual can set or negotiate their own rate of pay. 

  • The individual can set their own hours. 

  • The individual is customarily engaged in the same type of work performed under the independent contractor agreement with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work. 

  • The individual customarily and regularly exercises discretion and independent judgment in the performance of their services.

Naomi Primero & Christina Oatfield