Question: I run a virtual business with no employees, but independent contractors perform all the work. I heard about that case in California. Should I be doing something different in my business? Do I owe any penalties for how I’ve done it in the past?
Answer: Effective January 1, 2020, AB 5, later AB 2257, radically changed the rules and criteria for determining whether a worker’s classification is independent contractor or employee.
The so-called “gig law” was effective based on a California Supreme Court case from 2018. The significance of the ruling is that it changed the criteria of worker classification and held that workers are presumptively employees and the burden is on the hiring entity to establish that a worker is an independent contractor not subject to wage order protections in California.
Although this is a change impacting California employers, the rest of the country has eagerly watched and hoped to cash in on the changes that would generate billions in employment taxes.
Businesses that prefer to work with independent contractors such as Uber and Lyft were quick to propose a ballot initiative in 2020 that the voters passed and now drivers are exempt from the new criteria (insert eyeroll here).
Want to know how to get your own exemption from AB-5? Continue reading.