Back to All NewsNew Independent Contractor Law Passes in California
Posted By American Med Spa Association, Monday, October 14, 2019
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In mid-September, California Governor Gavin Newsom signed Assembly Bill 5 (AB 5) into law. This bill provides much-needed clarification to California’s rules about determining if someone is working as an independent contractor or should be considered an employee. AB 5 is available in full here. While this law applies generally to many types of working relationships, it may have particular ramifications for health care providers in medical spas.
AB 5 adopts a three-part test to be used in unemployment insurance and wage order issues to determine if the person is employed as an independent contractor or an employee. The three-part test asks if:
The three-part “ABC Standard” applies generally to all employment relationships, except for a number of specific exemptions. The exemptions are too numerous to list here; however, physicians and surgeons are included in the list. Of note, though, is that nurses and physician assistants are not included in the exclusion.
As a bit of background, in 1989, the California Supreme Court had adopted a test used to determine if a person was an employee or an independent contractor; this test was referred to as the Borello test, after the case in which it was created. The Borello test considered and weighed a number of factors used to determine if a worker is an employee or an independent contractor. In 2018, in a case known as Dynamex Operations West, Inc. v. Superior Court, the court adopted a new, more stringent three-part test referred to as the “ABC Standard.” However, as the Dynamex ruling was relatively narrow, it created some confusion as to whether the ABC Standard applied or if the older Borello test should be used. AB 5 was designed to statutorily adopt the Dynamex case law test and provide clear guidelines for when it applies.
If you currently employ a number of “independent contractors” or are thinking of adding some to your business, it is prudent to carefully review the nature of that relationship and see how AB 5 may affect it. The California Department of Industrial Relations provides a useful article available here. However, employment law in general is extremely complex, and it is doubly so for California, so it may be prudent to consult experienced counsel in these situations.
AB 5 adopts a three-part test to be used in unemployment insurance and wage order issues to determine if the person is employed as an independent contractor or an employee. The three-part test asks if:
The three-part “ABC Standard” applies generally to all employment relationships, except for a number of specific exemptions. The exemptions are too numerous to list here; however, physicians and surgeons are included in the list. Of note, though, is that nurses and physician assistants are not included in the exclusion.
As a bit of background, in 1989, the California Supreme Court had adopted a test used to determine if a person was an employee or an independent contractor; this test was referred to as the Borello test, after the case in which it was created. The Borello test considered and weighed a number of factors used to determine if a worker is an employee or an independent contractor. In 2018, in a case known as Dynamex Operations West, Inc. v. Superior Court, the court adopted a new, more stringent three-part test referred to as the “ABC Standard.” However, as the Dynamex ruling was relatively narrow, it created some confusion as to whether the ABC Standard applied or if the older Borello test should be used. AB 5 was designed to statutorily adopt the Dynamex case law test and provide clear guidelines for when it applies.
If you currently employ a number of “independent contractors” or are thinking of adding some to your business, it is prudent to carefully review the nature of that relationship and see how AB 5 may affect it. The California Department of Industrial Relations provides a useful article available here. However, employment law in general is extremely complex, and it is doubly so for California, so it may be prudent to consult experienced counsel in these situations.
