California enacts additional exemptions from worker classification provisions of A.B. 5
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Tuesday, September 15, 2020

California enacts additional exemptions from worker classification provisions of A.B. 5

By Payroll and Entitlements Editorial Staff

California has enacted additional exemptions from the worker classification provisions of A.B. 5, Laws 2019. The California provisions will determine whether an individual is an employee or an independent contractor for state income tax purposes.

A.B. 5. A.B. 5 took effect on January 1, 2020. It codified a 3-part test (commonly known as the "ABC" test) to determine if workers in California are employees or independent contractors. Under the test, a worker is an employee, unless the worker meets all of the following criteria:

  • is free from the control and direction of the hiring entity in connection with performing the work;
  • performs work outside the usual course of the hiring entity’s business; and
  • customarily engages in an independently established trade, occupation, or business of the same nature as the work performed.

Some occupations and business relationships are exempt from the ABC test. For these occupations and relationships, a multi-factor test (also known as the Borello test) applies to determine employee or independent contractor status.

Additional exemptions. The nuances of the new exemptions are complex. But, generally, new exemptions from the ABC test apply for the following occupations if certain requirements are met:

  • recording arts;
  • music;
  • performing arts;
  • landscape architecture;
  • translation, copy editing, and illustration;
  • real estate appraisal;
  • home inspection;
  • insurance underwriting inspection and services;
  • manufactured housing sales;
  • landscape architecture;

SOURCE: https://www.psca.org/research/HSA/2020report

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