AB5 – Independent Contractors Under Attack in California

Starting January 1, 2020, the rules of the game have changed and the consequences of non-compliance will be extremely expensive.  If you’re in business in CA or hire independent contractors(ICs) who are Based in CA, you need to know the NEW IC requirements ASAP.

The California Supreme Court’s holding in the Dynamex case created the ABC Test to determine if someone is an employee or independent contractor. Under the test, most of the typical ICs in CA would not meet the IC test so employers would be forced to make them employees. For this reason, the legislature created AB5, which makes clear the following:

1) ABC Test only applies if an exception doesn’t apply

2) If an exception applies, then follow AB5 requirements for the exception

3) If AB5 exception requirements are NOT followed, then ABC Test applies (this is bad)

Basically, by creating AB5 the CA legislature gave us options so we weren’t stuck with the ABC test as the only tool to determine who is an employee v. IC.

99% of folks that were previously ICs can continue to be ICs BUT as the hiring party we must now document according to the requirements laid out in AB5. Without stating so, AB5 created the necessity for an on-boarding process to ensure AB5 compliance when hiring ICs.

TAX PROS: Your clients need you to provide them the knowledge and create this process for them.

Majority of tax pros are not aware of what the AB5 requirements are and without this knowledge you can’t properly advise your clients. All of us have business clients and all of our business clients need this info – whether they’ve hired IC yet or not – because they will eventually.

We’re having a live webinar on December 5 where you’ll learn the ins and outs of AB5, the ABC test, the exceptions, and how to document the new requirements.