ABC Overdone: California Contractor Law in 2020

California has some regulatory doozies taking effect on Jan 1, 2020. There’s no question that both California’s version of GDPR, the California Consumer Privacy Act (CCPA), and the new Independent Contractor Law, Assembly Bill 5 (AB 5) have executives hoping to ensure compliance. Or at least we should be.

We’ll leave CCPA for another time. But even for our doom-is-around-the-corner-with-every-tweet, clickbait-happy era, the headlines on the impending effect of AB 5 range between apoplectic and apocalyptic. Here’s a few at the top of the search rankings:

  • “California Will Soon Learn Assembly Bill 5 Was a Historic Mistake” (Times of San Diego)

  • “California’s new employment law has boomeranged and is starting to crush freelancers” (CNBC)

  • “California is attempting a massive labor experiment that could grow into a disaster for millions of workers” (Business Insider)

Time will tell what the effect is. But there is no question that businesses have to be ready now with only two weeks until the new year. This should be as simple as ABC, as the following is the ABC test that is applied to determine who is an Independent Contractor and who is not an employee:

  • (A) The person 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.

  • (B) The person performs work that is outside the usual course of the hiring entity’s business.

  • (C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Easy as ABC - right? Not so fast. This is the LAW we’re talking about. There are a dizzying array of details, exemptions, and frameworks to be accounted for. In fact there are over 6,700 words in this law!! ABC ruined by DEF!

The complexities are so significant that if you don’t have in house attorneys, we highly recommend consulting experienced corporate/employment outside counsel if you utilize – or plan to utilize - any 1099 contractors in California. If you haven’t done so yet, we’ve gathered a review of some of our favorite articles on the topic from some leading law firms to help you prepare to talk to them:

  • Outstanding summary, focusing on five key basic issues employers must understand about AB 5, from Anthony Zaller at Zaller Law Group, PC.

  • Deep dive format for those who really want to dig in from Holland & Knight, LP, which really goes deep into the dizzying amount of exceptions to AB 5.

  • Clear and simple FAQ format which we found very helpful from Dorsey & Whitney LLP. This snippet from Dorsey’s FAQ post is important to our clients:

“What effect does AB 5 have on employers who hire temporary workers through a staffing agency? AB 5 does not have a direct effect on employers who hire temporary workers through a staffing agency, assuming the staffing agency categorizes those workers as employees of the staffing agency, and not independent contractors…We recommend companies retaining temporary workers through a staffing agency confirm that the staffing agency classifies the workers placed as employees, unless they clearly meet the definition of an independent contractor.”

RocketPower workers in our Staff Outsourcing business assigned to companies in California are employees of RocketPower. Our clients turn to RocketPower to outsource key roles across a variety of disciplines including go-to-market and customer operations, autonomous vehicle testers, software operations, data annotation, HR and Talent operations, even core engineering.

Our clients are hypergrowth companies across a variety of industries. Whether you’re looking to ensure compliance in California, or seeking to outsource to other areas in the US or the Americas with less onerous regulatory pressures and better costs bases, we’d love to talk to you about how we go about outsourcing at RocketPower.

Until then XYZ.

Examine Your (1099) Zaniness.

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