It may seem like it happened eons ago, but in reality it was just a couple of years ago. The so-called gig economy was booming, raising all sorts of questions about California employment classifications. So a new law intended to end all of the confusion took effect in January 2020. But then everything changed.
With so many people forced to work from home during the COVID-19 pandemic, the same old questions have resurfaced. Am I an employee or an independent contractor?
General classification of independent contractors and employees
Let’s begin with some simple explanations. Then we’ll delve into the legal aspects of this issue.
An independent contractor is broadly defined as someone who:
- Works for himself or herself
- Provides unique services requiring particular skills or knowledge to individuals, businesses or organizations
- Does jobs work for several customers or clients
- Determines pay rates
- Works from home or their own office, studio, shop, etc.
- Uses their own tools or equipment
- Determines how and when the work gets done based on each client’s or customer’s needs
An employee is generally classified as someone who:
- Works for a specific business
- Does a job within the purview of a specific business
- Has standard work hours
- Works at the employer’s office, shop, etc.
- Is trained and supervised by their employer
- Receive an hourly wage or salary from the business in exchange for work
- Is subject to disciplinary action by the employer
- Does their job in accordance with the employer’s specifications
Here are a couple of examples based on these criteria. A writer who works from home, provides blogs for various clients to post on their business websites, sets his or her own schedule, and is paid for each project would likely be identified as an independent contractor.
Conversely, a photojournalist employed by a local newspaper who reports to work at the office, takes photos as assigned by an editor, has a regular schedule and has an annual salary would be considered an employee.
Assembly Bill 5 and the ABC test
Assembly Bill 5, or AB5 is legislation inked by California Gov. Gavin Newsom in 2019. It took effect in January 2020 and mandates the use of the so-called “ABC test” for the classification of workers as employees or independent contractors in certain contexts. Specifically, the law mandates its use to differentiate employees and independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the Industrial Welfare Commission (IWC) wage orders.
The ABC test is a set of three criteria pertaining to control over the worker, the type of work done and the provision of the work. If a business can prove that a worker meets all three criteria, the worker is classified as an independent contractor. Otherwise the worker is classified as an employee.
Exceptions to the rules
However, it is important to note that the ABC test is not applicable in all situations, or to all types of employment. It is not applicable if the Legislature or the Industrial Welfare Commission defines the employment relationship in a certain way; or if a court presiding in a specific case determines another law supersedes its use.
In the second situation, a different set of standards called the Borello Test would be used to determine employment status. This test is much more detailed, taking more than a dozen factors into account. These include but are not limited to:
- The duration of the working relationship
- Which party provides the tools or equipment needed to do the job
- Payment terms
- Degree of supervision
- Whether the worker employs others
Under California labor law, the Borello test automatically applies to certain occupations and conditionally applies to others.
Changes and challenges
AB is not without its critics and challenges. As of October 2020, several legal challenges were still pending. State lawmakers also made a concerted effort during the 2020 legislative session to repeal or revise the controversial law. But when all was said and done, only one bill became law.
AB 2257 took effect when signed on September 4, 2020. Although it didn’t actually change the ABC test or fundamental aspects of AB5, it did modify and simplify some of the standing industry exceptions. It also adds more.
Some of the new exceptions to the ABC test created in AB 2257 include exemptions for certain creative professionals in the music industry, licensed landscape architects, freelance translators, professional foresters, and home inspectors. Exemptions were also created for people who sell manufactured housing, compile digital content, and teach master classes just to name a few.
However, it is important to note that these are conditional exemptions. Therefore it is important to consult an experienced Los Angeles employment lawyer regarding the “fine print.”
LawPLA helps Los Angeles employees and employers understand their rights
Why is this all so important? Under California law, employees have specific rights not necessarily afforded to independent contractors. As a result, employers may be tempted to misclassify employees as independent contractors. At the Law Office of Parag L. Amin P.C., we help southern California employees and employers understand their legal rights and obligations. Fill out the form on our website or give us a call to learn more, today.
