AB2257 and Classification of Employees and Independent Contractors

 Posted on October 01, 2020 in Employment Taxes

The employment laws in California have gone through a number of major changes over the past year. Assembly Bill 5 (AB5), which went into effect on January 1, 2020, put in place new rules for worker classification, specifying when a person may be considered an employee or an independent contractor. However, there has been some confusion about whether certain workers are exempt from these rules. A new bill, AB2257, was approved by California Governor Gavin Newsom on September 4, 2020, superseding, amending, and adding further complexity to the worker classification issue.

Exemptions Under AB2257

AB5 specified, with certain exceptions, that a three-part test, known as the “ABC test,” should be used to determine whether a worker should be classified as an employee or as an independent contractor. This test states that for a person to be considered an independent contractor, he or she must 1) be free from the control and direction of the company that hired him or her when performing his or her duties, 2) perform work that is not in the usual course of the hiring company’s business, and 3) regularly be engaged in a trade or occupation that has been established independently.

AB5 included exemptions to the ABC test for certain professions, and AB2257 has both provided further clarification regarding these exemptions and added new exemptions, examples of which include:

• Business-to-business contracts - A business that provides services to another business, a public agency, or a quasi-public corporation may be exempt, as long as it has a written contract for work performed and payment received, it maintains its own business location, and it uses its own tools and equipment.

• Referral agencies - Certain types of workers who provide services to clients through a referral agency may be exempt from the ABC test when determining whether they are employees of the referral agency. Workers who may be exempt include graphic designers, web designers, consultants, photographers, tutors, wedding or event planners, youth sports coaches, caddies, dog walkers, and interpreters.

• Professional services - Providers of certain services may be exempt, including marketers, human resources administrators, graphic designers, fine artists, barbers, estheticians, registered professional foresters, home inspectors, and appraisers. Freelance writers, editors, translators, illustrators, photographers, videographers, or photo editors may be exempt from the ABC test if they do not replace an employee who performed the same duties for the hiring company, do not primarily work at the hiring company’s location, and are permitted to provide services to more than one person or organization.

• Single-engagement events - Individuals or companies may be exempt when contracting to perform services at standalone, non-recurring events that take place at a single location, as well as a series of events occurring in the same location no more than once a week.

• Musicians and performers - People involved in creating, promoting, or distributing music or sound recordings may be exempt, including recording artists, songwriters, composers, managers, record producers, recording engineers, photographers who take publicity photos or create album covers, radio promoters, marketers, and independent music publicists. For single-engagement life performances such as concerts, musicians may be exempt from the ABC test, unless they are performing in a symphony orchestra, at a theme park or amusement park, in a musical theater production, as the headliner in a venue with more than 1,500 attendees, or at a festival that has sold more than 18,000 tickets per day.

Contact a San Jose Employee and Independent Contractor Lawyer

The California laws that specify whether a person is considered an employee or an independent contractor are complex, and penalties for noncompliance can be steep. Businesses will want to make sure they are complying with these regulations and classifying workers properly. If you have questions about how recent changes to the law may affect you, the Law Offices of John D. Teter can help you address these tax issues and make sure you are in compliance with state and federal laws. Call our qualified San Jose, CA business law attorney today at 408-866-1810 to schedule a private consultation.

Source:

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB2257