With respect to workers’ compensation, California Assembly Bill No. 5 (AB 5) goes into effect on July 1, 2020 and applies to policies issued on or after July 1, 2020, as well as policies in force as of July 1, 2020.
AB 5 creates a presumption that an entity’s workers are employees rather than independent contractors unless the hiring entity can show that the worker meets three conditions, known as the “ABC Test”:
THE “ABC” TEST
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
AB 5 provides an extensive list of occupations that are conditionally exempt from the application of Section 2750.3(a)(1). Occupations that are exempt from the “ABC” Test are instead governed by the 11-factor test found in the California Supreme Court’s decision in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.