Changes to Independent Contractor Classification in California for 2024

California continues to refine its rules regarding the classification of gig workers and independent contractors. This article provides an overview of the newly enacted laws, helping you understand your employment status and the rights that come with it.

Overview of New Rules

The primary legislative framework governing independent contractor classification in California remains AB 5 (Assembly Bill 5), which was enacted in 2019 and codified the “ABC test” for determining whether a worker is an employee or an independent contractor. The ABC test presumes that all workers are employees unless the hiring entity can demonstrate that the worker meets all three of the following conditions:

1. A. The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact.
2. B. The worker performs work that is outside the usual course of the hiring entity’s business.
3. C. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

For 2024, AB 2257 and subsequent amendments to AB 5 have introduced several exemptions and clarifications to the ABC test. These changes aim to address concerns from various industries and provide more nuanced criteria for specific professions.

Key Changes Affecting Gig Workers and Independent Contractors

1. Exemptions and Modifications:
   • Certain professions such as freelance writers, photographers, and specific performance artists are now subject to modified criteria under the Borello test instead of the ABC test, provided they meet certain conditions regarding the number of submissions and engagement terms.
   • Business-to-business (B2B) contractors, referral agencies, and single-engagement events are also given more tailored criteria to determine independent contractor status.
2. App-Based Drivers:
   • Proposition 22, passed in November 2020, provides that app-based transportation and delivery drivers are classified as independent contractors. However, they are entitled to certain benefits such as minimum earnings, healthcare subsidies, and insurance, differing from the standard employee benefits.
3. Penalties for Misclassification:
   • California continues to enforce strict penalties for the misclassification of employees as independent contractors, which include fines and back pay for wages and benefits.

Determining Your Employment Status

To determine whether you are an employee or an independent contractor, consider the following steps:

1. Review the Nature of Your Work:
   • Assess whether your work is integral to the core business of the hiring entity or if it is a separate, independent trade.
2. Evaluate Your Work Arrangements:
   • Check if you have significant control over how you perform your work, set your schedule, and operate your business independently.
3. Consult the ABC Test and Exemptions:
   • Use the ABC test as the initial guideline but be aware of any specific exemptions that may apply to your profession.

Rights and Benefits

Understanding your classification is crucial as it impacts your rights and benefits. Employees are entitled to:

• Minimum wage
• Overtime pay
• Workers’ compensation
• Unemployment insurance
• Paid sick leave
• Health benefits

In contrast, independent contractors typically do not receive these benefits but have the flexibility to manage their work and business operations.

Conclusion

California’s evolving regulations on independent contractor classification seek to balance the protection of workers’ rights with the operational needs of businesses. If you are unsure about your status or need guidance on navigating these changes, it is advisable to consult with an experienced employment attorney who can provide personalized advice and representation.

For more detailed information and legal advice, feel free to contact our experienced team at Labor Law PC.