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New Law AB 2257 Adds Independent Contractor Exemptions


New Law Adds Independent Contractor Exemptions

A new law has come to the rescue of a number of freelance professions by exempting them from the onerous requirements of AB 5, which required most independent contractors to be classified as employees in California. Governor Gavin Newsom on Sept. 1 signed AB 2257 as an urgency measure, so that it took effect immediately after it passed unanimously in both houses of the state Legislature.

If you remember, AB 5 set a new standard for hiring independent contractors, requiring many to be reclassified as employees covered by minimum wage, overtime, workers’ compensation, unemployment and disability insurance. It created a three-pronged test that needs to be satisfied to determine if someone is an independent contractor or an employee. To be an independent contractor under AB 5’s “ABC test,” workers must (A) work independently, (B) do work that is different from what the business does, and (C) offer their work to other businesses or the public. All three conditions must be met. It is prong B that’s problematic, as for example, a freelance writer working for a publication would not be doing something different than the business does. The law set limits on the amount of income someone can receive while doing this kind of work before being considered an employee.

Exemptions under AB 2257

AB 2257 preserves the ABC test for independent contractor classification but adds a number of exemptions from this test. Here are the professions now exempt from AB 5, meaning that they can be considered independent contractors if they meet the pre-AB5 standards for independent contractor status, called the Borello Test:

  • Youth sports coaches
  • Specialized performers
  • Home inspectors
  • Insurance industry field service contractors
  • Appraisers
  • Underwriting inspectors
  • Premium auditors
  • Risk management, or loss control specialists
  • Sports competition judges, umpires and referees
  • Graphic design
  • Web design
  • Tutoring
  • Consulting
  • Caddying
  • Wedding planning and event vending
  • Yard cleanup
  • Captioning, and
  • Interpreting and translating services.

AB 5 also has a freelancer exemption, which has been expanded by the new law to include:

  • Fine artists
  • Freelance writers
  • Translators
  • Editors and content contributors
  • Advisors, narrators, cartographers, producers and copy editors, and
  • Illustrators, and newspaper cartoonists working under written contracts.

AB 2257 also expands the “business-to-business” definition in AB 5 to cover a relationship between two or more sole proprietors.

If you have questions about whether your business falls under an exemption and what that means for your insurance requirements, please speak with one of our agents.