New California Bill Clarifies Worker Classification Test for Professions Excluded from AB 5

On October 2, 2019, the Governor of California approved Assembly Bill 170, which details the alternative test for workers to be classified as Independent Contractors within professions that are specifically excluded from the provisions of Assembly Bill 5, which was approved last month. Workers under AB 5 are presumed to be employees unless the hiring entity demonstrates that their workers pass the 3-part “ABC” test from Dynamex Operations W. Inc. v. Superior Court, (2018) 4 Cal.5th 903, as discussed previously here. Certain professions, however, such as licensed insurance agents, direct sales salespersons, and real estate licensees, are excluded from the ABC test, and instead worker classification in those professions will be determined by conditions set forth in S. G. Borello & Sons, Inc. v. Department of Industrial Relations, (1989) 48 Cal.3d 341, namely:

1. The individual maintains a business location, which may include the individual’s residence, that is separate from the hiring entity. Nothing in this subdivision prohibits an individual from choosing to perform services at the location of the hiring entity.
2. If work is performed more than six months after the effective date of this section, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession.
3. The individual has the ability to set or negotiate their own rates for the services performed.
4. Outside of project completion dates and reasonable business hours, the individual has the ability to set the individual’s own hours.
5. The individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work.
6. The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.

To read AB 170 in full, click here. To discuss your worker classification practices in light of the recent changes to California law, contact one of our attorneys today.