On September 4, 2020, Governor Gavin Newsom approved AB-2257, which expands the occupations and business relationships that are exempt from the “ABC test,” which was established by AB-5.

In 2019, the California State Assembly passed AB-5, enacting stricter laws to avoid the misclassification of workers as independent contractors, which effectively provided less protections for independent contractors. AB-5 codified the “ABC test” from the 2018 California Supreme Court decision in Dynamex West Operations, Inc. v. Superior Court. Under the “ABC test”, a worker is classified as an employee unless all three of the following factors are satisfied: (A) the worker has the right to control his or her own work performance; (B) the worker performs tasks outside of the employer’s typical course of business; and (C) the worker does similar work in an independently established business or trade. AB-5 provided exemptions for certain professions; however, the new independent contractor law presented unique difficulties for businesses and workers in many other industries.

AB-2257 helps clarify which industries and occupations the ABC test should be applied to, while creating additional exemptions in other professions. Exempt workers’ employment classifications should be analyzed under the multifactor test established in the 1989 California Supreme Court case, S. G. Borello & Sons, Inc. v. Department of Industrial Relations. AB-2257 provides that the multifactor test, rather than the ABC test, should apply to the following occupations or relationships: business-to-business contracting relationships; referral agency and service provider relationships; writer and multimedia professionals; music industry professionals; performing arts professionals; data aggregators; individuals providing certain services in insurance and finance; individuals providing appraisal services; home inspectors or manufactured house salesperson; registered professional foresters; individuals engaged in an international exchange visitor program in compliance with the federal government and federal regulations; and competition judges.

Although AB-2257 clarifies the protections and exemptions to be provided under California Labor Law, businesses and workers should consult an attorney before establishing a worker classification.

Please visit Assemblywoman Lorena Gonzalez’ website for a summary of AB-2257. You may also click here for the full text of the bill.

This post is for informational purposes only, and merely recites the general rules of the road. Many legal rules have exceptions, and every case is unique. Never rely solely on a blog post in evaluating your situation — always contact a business attorney when your legal rights and obligations are on the line.