California AB5 Exemptions, Part 2

This article is not legal advice. I am not an attorney, and don’t even need this disclaimer, but it’s here because it may give the impression that I know what I’m talking about. I repeat: this is not legal advice. It is for entertainment and education purposes only.

In the previous page, we covered the first list of exemptions from the AB5 gig worker law, which were mostly licensed people. This short list of carveouts were clear.

AB5 also allows exemptions for a number of “professional services” businesses that operate as independent contractors. To qualify, these businesses must satisfy some conditions, which will be described below.

First, let’s look at the text of the law, and see the types of businesses:

  • (i) Marketing, provided that the contracted work is original and creative in character and the result of which depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of or necessarily incident to any of the contracted work.
  • (ii) Administrator of human resources, provided that the contracted work is predominantly intellectual and varied in character and is of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time.
  • (iii) Travel agent services provided by either of the following: (I) a person regulated by the Attorney General under Article 2.6 (commencing with Section 17550) of Chapter 1 of Part 3 of Division 7 of the Business and Professions Code, or (II) an individual who is a seller of travel within the meaning of subdivision (a) of Section 17550.1 of the Business and Professions Code and who is exempt from the registration under subdivision (g) of Section 17550.20 of the Business and Professions Code.
  • (iv) Graphic design.
  • (v) Grant writer.
  • (vi) Fine artist.
  • (vii) Services provided by an enrolled agent who is licensed by the United States Department of the Treasury to practice before the Internal Revenue Service pursuant to Part 10 of Subtitle A of Title 31 of the Code of Federal Regulations.
  • (viii) Payment processing agent through an independent sales organization.
  • (ix) Services provided by a still photographer or photojournalist who do not license content submissions to the putative employer more than 35 times per year. This clause is not applicable to an individual who works on motion pictures, which includes, but is not limited to, projects produced for theatrical, television, internet streaming for any device, commercial productions, broadcast news, music videos, and live shows, whether distributed live or recorded for later broadcast, regardless of the distribution platform. For purposes of this clause a “submission” is one or more items or forms of content produced by a still photographer or photojournalist that: (I) pertains to a specific event or specific subject; (II) is provided for in a contract that defines the scope of the work; and (III) is accepted by and licensed to the publication or stock photography company and published or posted. Nothing in this section shall prevent a photographer or artist from displaying their work product for sale.
  • (x) Services provided by a freelance writer, editor, or newspaper cartoonist who does not provide content submissions to the putative employer more than 35 times per year. Items of content produced on a recurring basis related to a general topic shall be considered separate submissions for purposes of calculating the 35 times per year. For purposes of this clause, a “submission” is one or more items or forms of content by a freelance journalist that: (I) pertains to a specific event or topic; (II) is provided for in a contract that defines the scope of the work; (III) is accepted by the publication or company and published or posted for sale.
  • (xi) Services provided by a licensed esthetician, licensed electrologist, licensed manicurist, licensed barber, or licensed cosmetologist provided that the individual:(I) Sets their own rates, processes their own payments, and is paid directly by clients.(II) Sets their own hours of work and has sole discretion to decide the number of clients and which clients for whom they will provide services.(III) Has their own book of business and schedules their own appointments.(IV) Maintains their own business license for the services offered to clients.(V) If the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which they rent their business space.(VI) This subdivision shall become inoperative, with respect to licensed manicurists, on January 1, 2022.

And, exemptions for a couple more categories.

  • (d) Subdivision (a) and the holding in Dynamex do not apply to the following, which are subject to the Business and Professions Code:
    • (1) A real estate licensee licensed by the State of California pursuant to Division 4 (commencing with Section 10000) of the Business and Professions Code, for whom the determination of employee or independent contractor status shall be governed by subdivision (b) of Section 10032 of the Business and Professions Code. If that section is not applicable, then this determination shall be governed as follows: (A) for purposes of unemployment insurance by Section 650 of the Unemployment Insurance Code; (B) for purposes of workers compensation by Section 3200 et seq.; and (C) for all other purposes in the Labor Code by Borello. The statutorily imposed duties of a responsible broker under Section 10015.1 of the Business and Professions Code are not factors to be considered under the Borello test.
    • (2) A repossession agency licensed pursuant to Section 7500.2 of the Business and Professions Code, for whom the determination of employee or independent contractor status shall be governed by Section 7500.2 of the Business and Professions Code, if the repossession agency is free from the control and direction of the hiring person or entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

Are you one of the above businesses or contractors?

If NO, you are probably not exempt, but, there is one last general exemption, for businesses offering business-to-business services. So, go there and see if you are a business that would qualify.

If YES, keep reading. You must satisfy the following criteria to qualify.

  • (A) The individual maintains a business location, which may include the individual’s residence, that is separate from the hiring entity. Nothing in this subdivision prohibits an individual from choosing to perform services at the location of the hiring entity.
  • (B) If work is performed more than six months after the effective date of this section, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession.
  • (C) The individual has the ability to set or negotiate their own rates for the services performed.
  • (D) Outside of project completion dates and reasonable business hours, the individual has the ability to set the individual’s own hours.
  • (E) The individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work.
  • (F) The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.

Are all your ducks lined up in a row?

If you satisfy all six of the criteria, then, you are considered an independent contractor and are exempt from AB5.

However, the conditions of the Borello law apply.

Coming soon… the Borello law. (In summary, that law has a list of conditions of work that determine if the worker must be classified as an employee rather than an independent contractor. This is the “old IC law”.)