California Clarifies Independent Contractor Test and Adds New Exemptions

Author: Michael Cardman, XpertHR Legal Editor

September 8, 2020

In an effort to "provide greater certainty for workers and employers," California is updating its main independent contractor test.

Effective immediately on its passage September 4, AB 2257 is intended to clarify and expand the ABC test, which governs independent contractor classification under California's wage and hour, workers' compensation, unemployment insurance and labor laws. The ABC test was established by the California Supreme Court in its 2018 Dynamex ruling and then codified as part of the state's labor code earlier this year.

AB 2257 creates new exemptions for:

  • Professionals in the music and performing arts industries;
  • Data aggregators;
  • Individuals providing underwriting inspections, premium audits, risk management or loss control work for the insurance and financial service industries;
  • Individuals providing appraisal services; and
  • Others.

It also repeals a requirement that the ABC test automatically applies to freelance writers, still photographers, photojournalists and editors after they have provided more than 35 content submissions to a single hiring entity, and replaces it with a less-strict test for hiring entities.

The bill significantly expands several types of business-contracting relationships that are governed by the more employer-friendly Borello test rather than the ABC test:

This creates "multiple, reasonable pathways for businesses to comply with the law," according to a statement from the bill's author, California State Assemblywoman Lorena Gonzalez.

Notably absent from the bill were exemptions for gig economy workers. Companies like Uber and Postmates had heavily lobbied the legislature seeking a carve-out and even filed a lawsuit against the ABC test.