California AB5 Law, Business-to-Business Exemptions

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.

The CA AB5 gig worker law, there are lists of exempted persons, and also exempted professional services. If you came to this page from a search result, and want to determine if you are exempted, go to the first page in this mini-site.

There’s a broad exemption for businesses selling services to other businesses: the B2B rules. The main issue is qualifying for it: you must be a legitimate business.

There’s some people talking online about “sole proprietorship/LLC”. I’ll touch on that later.

This mini-site is structured like “Choose Your Own Adventure” taking you on a journey through the text of the law.

What Makes a Business under AB5?

The following is the text of the law.

(1) If a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation (“business service provider”) contracts to provide services to another such business (“contracting business”), the determination of employee or independent contractor status of the business services provider shall be governed by Borello, if the contracting business demonstrates that all of the following criteria are satisfied:

  • (A) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
  • (B) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.
  • (C) The contract with the business service provider is in writing.
  • (D) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.
  • (E) The business service provider maintains a business location that is separate from the business or work location of the contracting business.
  • (F) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.
  • (G) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.
  • (H) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.
  • (I) The business service provider provides its own tools, vehicles, and equipment to perform the services.
  • (J) The business service provider can negotiate its own rates.
  • (K) Consistent with the nature of the work, the business service provider can set its own hours and location of work.
  • (L) The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

I have no idea what L means. See the text for details.

Does your business satisfy all 12 conditions?

If NO, then you should go to the ABC test.

If YES, then, you are exempted from AB5, but your independent contractor status will be determined by Borello.

Information on Borello’s coming soon.

Borello lists rules that determine if a worker must be classified as an employee.