California Expands Exemptions for Independent Contractors
Last year, Governor Newsom signed Assembly Bill 5, a law that set strict parameters to determine if a worker should be considered a contractor or an employee. Many California businesses rely on contractors, so this bill put a strain on several companies.
This past September, Governor Newsom signed a new bill, Assembly Bill 2257, which expands exemptions for independent contractors in California. Here, employment law attorney Gregory Thyberg reviews the exemptions provided in AB 2257, to help employers in Sacramento, CA, and surrounding areas understand how this bill may affect their employee classifications and the ability to hire contract workers.
Assembly Bill 5
Before going over the new exemptions provided by AB 2257, we’ll provide a brief overview of Assembly Bill 5, which was signed into law in September of 2019. AB 5 clarified the ruling of the California Supreme Court Case, Dynamex Operations West, Inc. v. Superior Court of Los Angeles. Essentially, this case found that there is a general presumption that most workers should be classified as employees, and placed the burden of proof on employers to show why a worker should be classified as a contractor.
AB 5 clarified this burden of proof by requiring employers to administer an ABC test to determine if a worker can be classified as a contractor. To classify a worker as a contractor, hirers must be able to prove three points:
- The worker is free from the control and direction of the hirer in connection with the performance of the work.
- The worker performs work that is outside the usual scope of the hiring entity’s business.
- The worker is customarily engaged in independent work of the same nature as the work performed for the hiring entity.
AB 5 specified exemptions for certain occupational and professional services, as well as some individuals working for referral agencies, or those in the field of construction, but the exemptions were somewhat limited.
Exemptions Expanded by Assembly Bill 2257
With the exemptions specified in AB 5, hirers in certain fields of work are able to employ a much less stringent test to determine if a Sacramento worker can be classified as a contractor. AB 2257 further clarifies and expands some of the exemptions included in AB 5, such as:
- Referral agency exemptions - Expands these exemptions to include youth sports coaching, interpreting services, and consulting services.
- Professional service exemptions - Expands and clarifies the exemptions to include photojournalists, photographers, videographers, photo editors, “master class” instructors, appraisers, home inspectors, and professional foresters.
- Occupational exemptions - Broadens AB 5 exemptions to include landscape architects, manufactured homes salespeople, competition judges, and individuals offering financial or insurance services such as underwriting inspections, premium audits, risk management, or loss control work.
In addition to expanding on previous areas of exemption, AB 2257 establishes new exemptions for certain individual performance artists, as well as many others working in the marketing, promoting, or distributing of recorded music or musical composition.
When Do These Exemptions Go Into Effect?
The expanded exemptions provided by AB 2257 went into effect immediately upon the bill being signed by Governor Newsom in September 2020.
The parameters and exemptions defined by AB 5 and AB 2257 can be difficult to understand, but employment law attorney Gregory Thyberg is happy to help clients consider their hiring and employment rights. If you have further questions about the exemptions provided by AB 2257, send us a message or call our Sacramento law firm at (916) 204-9173.