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Independent Contractors Defined by California Law

This article is reproduced with permission  from Spidell Publishing, Inc.

AB 5, which codifies the California Supreme Court’s ruling in Dynamex Operations West, Inc. v. Superior  Court (2018) 4 Cal.5th 903, has been passed by the California Legislature and signed by the Governor.

Under AB 5, most workers are presumed to be an employee unless a hiring entity satisfies a three-factor test, referred to as the ABC Test. Under the ABC Test, all three of these conditions must be met in order to treat the worker as an independent contractor:

  • 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 (the Borello “Control Test”).
  • The worker performs work that is outside the usual course of the hiring entity’s business.
  • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

While this is a huge shift, there are pages of exemptions from the new requirements for numerous specified occupations (e.g., doctors and accountants), professional services (e.g., Enrolled Agents, marketers), business-to-business contracting, certain construction subcontractors, and more.

The text of the bill may be found at:

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