California Assembly Bill 5 Cranks Up the Questions – Email and Phone Calls
The California Assembly Bill 5 (also known as AB 5) article published by me this week generated the most phone calls and emails on an article in months.
J&L heard in the last 48 hours from a:
- Dog walking company
- Trucking line
- Associated consultant
- Insurance agency
- Temporary employer
- Medical clinic
- Other employers
Some of the forward-thinking employers and entrepreneurs were not directly affected by California Assembly Bill 5. Their companies were located in other states. Their concern originated with my statement 10 years ago that I included in the recent article. <<<Check out that article here.
The statement – what happens in California may be coming to a state near you – raised many questions within the general employer community on who was an independent contractor and who is an employee.
The IRS website names even more categories of employees or contractors. I use the website as my go-to starting point for employers. Check out the IRS determinations here. Yes, I know that many states have exceptions. I use the website as a rule-of-thumb only.
The IRS categorizes workers as:
- An independent contractor
- An employee (common-law employee)
- A statutory employee
- A statutory nonemployee
- A government worker
If you had thought only two employee categories of workers exist, you might want to check out the definitions of each type. I will be updating my IRS subcontractor page analysis next week with a new article. The IRS always provides a plethora of information on taxes on their website.
Certificates of Insurance become very valuable at the time of the premium audit. Make sure that the premium auditor sees any certificates of insurance. More proof of the type of relationship exists, but if you have the certificates, attach them to your organized spreadsheets to lower your workers’ comp audit stress level.
Wait, do you organize your employees and contractors on a spreadsheet for the premium audit? If not, an employer should immediately start that project when the notice of premium audit letter arrives with a proposed date of audit.
Organization and neatness count tremendously during any audit (premium, tax, unemployment, etc.). Excel(r) can be your best friend.
The California Assembly Bill 5 was a codification of the Dynamex court decision that added in one major concern that had previously not been considered:
Is the worker an integral part of your business? Google defines the word integral as:
- necessary to make a whole complete; essential or fundamental.
You may want to refer to the actual decision using this Dynamex court decision link. This court decision became the basis for California Assembly Bill 5.
The chain of events was:
- Dynamex decision
- AB 5 produced
- AB 5 passed
- Governor signed into law
- Law became effective January 1, 2020
- Gig-based companies are ignoring the law
- Trucking companies filed for an injunction against AB 5
- Large gig-based companies pledging $100 million to repeal the law
Please remember we/I are not attorneys or agents, so you may wish to consult with your agent and attorney on your compliance with California Assembly Bill 5.
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