AB5 Law in California

California AB5 law states that all company employees are presumed eligible to receive W-2s, unless a company can prove that a individuals is an independent contractors, according to the ABC test. AB5 law applies only to workers in California regardless of which state the employer is based.

California AB5 law requires all companies in California to apply application of the “ABC test” to determine if workers in California are employees or independent contractors. AB5 law affects independent contractors throughout California, making all workers preemptively an employee. California AB5 law made it significantly harder for businesses operating within the state to classify their workers as independent contractors instead of employees.

Determine whether a worker is an employee or independent contractor.

AB5 law in California requires the application of the “ABC test” to determine whether a providing services in California should be classified as an independent contractor or an employee. The ABC test under AB5 law states that the following 3 conditions must be met:

The worker must be free from direction and control of the hiring party in relation to how and when the work is performed.
The work performed by the worker is outside of the main business of the company.
The worker must be independently engaged in a business or occupation in the same industry as the work they were hired.

The ABC test for AB5 law is now to be used to justify the classification of independent contractors instead of workers. This test is used by the Unemployment Insurance Code and California Labor Code as well as in wage claims.

Does California AB5 law apply exempt workers?

AB5 law makes an exception for most workers involved in creating, marketing, promoting, or distributing music, including: lawyers, doctors, songwriters, artiest, composer, etc. AB5 also exempts business-to-business contractors that meet 12 specific requirements and referral agencies that meet 10 specific requirements. The AB5 business to business exemption allows business service providers who are established as a sole proprietorship, limited liability company, partnership, or S corp. Some examples of exempt professions are:

Licensed physicians
Investment advisers
Cosmetology services
Licensed barbers
Surgeons
Dentists
Architects
Licensed attorneys
Engineers
Architects
Accountants

California Employers who violate AB5 law is subject a civil penalty ranging between $5,000 – $15,000 per violation. AB5 law prohibits the willful misclassification of individuals as independent contractors which under Labor Code section 226.8, imposes civil penalties of between $5,000 and $25,000 per violation. The civil penalties can be up to $15,000 per violation if the employer is found to have willfully misclassified an employee. This penalty may increase if the employer is found to regularly misclassify workers as independent contractors.

Most recent blogs:

How to Calculate FTE

To calculate full-time equivalent (FTE), divide an employee's scheduled hours by the employer's hours for a full-time workweek.

Weingarten Rights

Understand Weingarten Rights: the right to have a representative during investigatory interviews as protected under the NLRA. Learn how these rights empower employees and safeguard their interests.

Can you get fired for using sick time

Understand your rights under California's Sick Leave Statute, protecting employees who need to take time off due to illness. Learn how legal protections safeguard against wrongful termination for using sick leave.

Insubordination in the workplace: 7 ways to manage

Navigate the challenges of insubordination in the workplace with effective strategies for managing difficult employee behaviors and fostering a positive work environment. Learn the importance of distinguishing between disagreement and insubordination for organizational health.

Diversity, Equity, and Inclusion

Explore the importance of diversity, equity, and inclusion in today's society. Learn how these values shape better, more inclusive communities and workplaces.

Human Resources (HR): Meaning and Responsibilities

Human Resources plays a pivotal role in recruiting, training, and managing employee relations, shaping a company's workforce for success. Discover the evolving responsibilities and strategic importance of HR in modern business dynamics.

10 Alternatives to Employee of the Month Awards

Discover the limitations of traditional Employee of the Month awards and explore ten innovative alternatives. Boost morale and recognition in your workplace with these creative solutions.

Learning To Learn

Discover the essential skills for modern leaders to thrive: learning to learn, adapting to change, and mastering new capabilities. Unveil strategies for personal growth and overcoming reluctance to embrace new challenges.

Gen Z Years, Age Range, Meaning, & Characteristics

Explore the defining years, age range, and unique characteristics of Generation Z, shaped by pivotal events like the pandemic and the digital age. Uncover insights into Gen Z's diverse demographics, digital nativity, and shifting social norms.

Quid Pro Quo Sexual Harassment and Law

Explore the origin and evolution of "quid pro quo," a principle that embodies mutual exchange in legal, political, and everyday contexts. Learn how it differentiates from bribery and shapes contracts, policies, and workplace ethics.

What is Sabbatical Leave? It’s the best kept secret in HR

Unlock the power of sabbatical leave to boost employee motivation and retention in a stagnating labor market. Learn how a planned break can give your company a competitive edge in attracting top talent.

At-Will Doctrine

Explore the at-will employment doctrine's impact on job security and termination rights in the US, highlighting key legal exceptions. Understand how at-will affects both employers and employees, with insights into valid termination causes and protections.

7-Day Work Week

Discover your rights under the 7-day work week laws, including eligibility for overtime and restrictions in some states. Learn about federal and state regulations, and when to seek legal action for wage violations.

What Happens When Employers Make False Promises

A false promise happens when a employer or hiring manager makes a statement on something the company can fulfill or avoid, but cannot or does not want to follow through with. You may bring a fraudulent inducement lawsuit against the employer for false promises for the harm you have suffered.

What to do if your employer doesn’t pay you?

If your employer failed to pay you for all of your work hours, a court could award you back pay. When your employer doesn't pay you, you should consult with an employment lawyer.

What to Do At a Job Fair to Impress Employers and Get the Interview

This article provides guidelines for job seekers to follow to ensure they are successful at career fairs. There are many things you can do to improve your chances of getting hired at a job fair.

Emotional Duress: How to Avoid

Emotional duress is an extremely unpleasant emotional response from someone else's conduct or actions. You can sue for money damages for anguish, or humiliation. This is known as emotional harm or mental anguish.

California Termination Laws

In California, an employee's employment may be terminated at the will of either party. Employees who are terminated must be paid all wages due at the time of termination.

Late Paycheck Penalty

When your paycheck is late, the employer has to pay a penalty of one day's pay for each day that the paycheck is late, up to a maximum of thirty days.

How To Calm Down Before An Interview

12 simple ways on to calm your nerves before and during an interview is to use relaxation techniques. Before an interview, imagine how you would ideally want to present yourself in the interview and then visualize yourself in the interview.

How to Include a Referral in Your Cover Letter?

Your cover letter should start with mentioning the referral's name because it instantly qualifies you. A referral cover letter helps you to define the mutual contact that has referred you for the job.

Best Job Options For Someone With A Criminal Record

This article identifies jobs for someone with a criminal record; examples are: delivery service, freelance designer, truck driver, chef, etc.

What are Weingarten Rights?

Weingarten rights guarantee an employee the right to Union representation during an investigatory interview by their employer.

What Is Job Rotation: Advantages And Disadvantages

Job rotation is the practice of moving employees between roles or positions in a company. Job rotation temporarily assigns employees to other roles to teach them new skills, learn about other functions within the team, and develop relationships across the business.

What is the meaning of Pay Rate?

Pay rate is the total money a worker receives during regular working hours, excluding overtime. In order words, pay rate, also called salary rate or compensation rate, is the wage amount paid to an employee per hour, per day, or per task completed.

How can part-time or temporary work help you explore career choices?

Part-time or temporary work offers a practical way to explore exploring and understanding what career you want. Temporary work or part time work gives you the opportunity to discover your strengths, preferences, and passions without the long-term commitment required by full-time work.

Understanding Incentive Pay: Definition, Types, and Benefits Explained

Learn how different forms of incentive pay, from bonuses to commission, can drive business success and enhance workforce engagement. Discover the key benefits and best practices of implementing incentive pay strategies in your organization, essential for attracting and retaining top talent.

What Happens When You Get Audited EDD

Gain clarity on the EDD audit process with our comprehensive guide, detailing what happens when you get audited by the Employment Development Department, including steps to prepare and respond effectively." "Navigate the complexities of an EDD audit smoothly with our expert insights, exploring the implications, documentation requirements, and key strategies to manage the auditing process efficiently and confidently.

What is FMLA Intermittent Leave of Absence?

An employee uses their 12 weeks of unpaid leave intermittently under FMLA Intermittent leave, taking it off and on, unlike continuous family medical leave or a reduced work schedule. FMLA leave can be taken intermittently by employees – in separate blocks of time for a single qualifying reason – or on a reduced leave schedule, which involves reducing the employee's usual weekly or daily work schedule, when it is medically necessary.

What is a statutory employee?

A statutory employee is a salesperson, either traveling full-time or based in a city, who represents you and submits orders from wholesalers, retailers, contractors, or operators of establishments such as hotels and restaurants. The merchandise sold should be for resale, or the supplies should be for use in the buyer's business operation. For you, the principal business activity performed must be the salesperson's work.