A new bill has been passed in the California legislature that will make it easier for certain workers, notably freelancers, to be classified as independent contractors rather than employees. Assembly Bill 2257, or AB2257, was passed on Monday, August 31.
Last year, the California legislature passed AB5, a law which established the “ABC” test for classifying workers as either independent contractors or employees. AB5 and the ABC test went into effect at the start of 2020. Under the ABC test, many independent contractors were reclassified as employees.
This had the positive effect of allowing such workers to qualify for benefits like health insurance and protections such as worker’s compensation, but also had the negative effect of making it very difficult for business owners to hire independent contractors, and caused many workers to lose their jobs because business owners could not afford to bring them on as employees.
AB2257 seeks to reduce this negative effect by creating more exemptions to AB5. Under the new law, the following professions, among others, are now exempt from AB5 and the ABC test:
- Photographers, photojournalists, videographers, and digital media aggregators
- Freelance writers, translators, editors, illustrators, and cartoonists
- Musicians and music industry professionals including recording artists, record producers, musical engineers and mixers, vocalists, and independent radio promoters
- Advisors, producers, narrators and cartographers for a journal, book, periodical, or other educational or academic publication
- Insurance underwriters, real estate appraisers, and home inspectors
Subject to certain conditions, these workers will be classified based on the “Borello” test, which was used prior to the passing of AB5 and establishment of the ABC test. Under the Borello test, it is much easier for a worker to qualify as an independent contractor rather than an employee.
The Borello test, also called the “Right to Control” test, bases the employee/independent determination on the extent to which the hiring entity exercises control over the worker and the work to be performed. If the hiring entity has a high level of control over the manner and means of the work, then the worker is an employee, and not an independent contractor. The Borello test weighs eleven factors, none of which is a single deciding factor:
- Whether the person performing work is engaged in an occupation or business that is distinct from that of the company;
- Whether the work is part of the company’s regular business;
- Whether the company or the worker supplies the equipment, tools, and the place for the person doing the work;
- The worker’s financial investment in the equipment or materials required to perform the work;
- The skill required in the particular occupation;
- The kind of occupation, with reference to whether, in the locality, the work is usually done under the company’s direction or by a specialist without supervision;
- The worker’s opportunity for profit or loss depending on his or her own managerial skill (a potential for profit does not include bonuses);
- How long the services are to be performed;
- The degree of permanence of the working relationship;
- The payment method, whether by time or by the job; and
- Whether the parties believe they are creating an employer/employee relationship.
The passing of AB2257 is good news for business owners and freelancers who have struggled to meet their hiring needs or to find work under the highly restrictive ABC test.