If you are a small business owner in California who works with independent contractors, you may have some interesting and challenging times ahead. Many independent contractors work with companies in San Francisco on a project-by-project basis. On September 18, 2019, California Governor Gavin Newsom signed into law a bill known as AB5. The “gig worker bill,” as it is called, may reclassify the employment status of millions of California independent contractors to make them employees of the companies for which they work. Large employers and small business owners alike are struggling to grasp the ultimate impact of this legislation. A small business lawyer in San Francisco can help you understand how this new law may affect you as a business owner. Below we will answer some of the frequently asked questions we receive on this topic.

What Exactly Does AB5 Govern?

California’s Supreme Court established the “ABC Test” that will classify a worker’s status under the Dynamex case. This test assumes a worker is an employee unless this test is met by satisfying the following three criteria:

• The worker is free from control and direction in the performance of his or her services; and
• The worker is performing work outside the usual course of the business of the hiring company; and
• The worker is customarily engaged in an independently established trade, occupation, or business.

All three prongs of this test must be satisfied for a person to be classified as an independent contractor and not an employee.

Why is This Such a Big Deal?

The AB5 legislation would require many current independent contractors to be reclassified as employees, or lose their work completely. With employee status comes benefits that are expensive for an employer to provide, such as workers’ compensation, unemployment insurance, minimum wage, expense reimbursement, family leave, and paid sick leave. The benefit of hiring an independent contractor over an employee is that an independent contractor is free to do what he or she wants in order to deliver the work required, and the employer is not legally obligated to provide additional employee benefits. In many cases, it is a win-win situation for all parties. If you are wondering how this legislation will impact your business operation, contact a San Francisco small business lawyer for guidance.

Are There any Exemptions?

Many California companies are frantically attempting to exempt themselves from this new law. Major lobbying efforts (on both sides) occurred before this bill was passed and some professions are excluded from this legislation, including doctors, dentists, lawyers, accountants, insurance agents, real estate agents, hair stylists, stockbrokers, engineers, veterinarians, aestheticians, commercial fisherman, marketing professionals, travel agents, graphic designers, grant writers, payment processing agents, fine artists, and human resource administrators.

Some creative businesses have limited exemption status under the new law. Photographers, photojournalists, freelance writers, editors, and cartoonists are exempt if they make 35 or fewer submissions a year to a company. For a business that primarily earns an income through freelance work or independent contractor work, this law could change the landscape of their business.

Is This Law Set in Stone?

There is a push to take this law directly to the voters. California citizens may have the right to decide on the November 2020 ballot. Nothing is certain at this point.

What Should a Small Business Owner do?

Hiring legal counsel is the best first step. Consulting an experienced small business lawyer in San Francisco who specializes in employment law can help you understand if you will be affected by this new AB5 legislation. The truth is that the AB5 legislation is brand new, and you should always visit with legal counsel to ensure that your business is protected at all times. Contact Coepio Legal in San Francisco today. We would welcome the opportunity to visit with you regarding your business. Call our office at 415-323-6212 for a free consultation.