Will AB5 Affect Your Business?

Tuesday, August 10 2021

If you’re a business owner in the state of California, you’ve probably heard of AB5. Signed into law by Governor Newsom in late 2019, the bill requires employers who hire independent contractors (1099 workers) to be reclassified as employees - including with mandatory worker’s comp and all other compliance regulations. 

 In 2020, Bill 2257 was passed, which made exemptions for many types of businesses under AB5. This was followed up with the ABC test that was created to determine whether an employer should classify certain workers as employees or contractors.

 The ABC test asks three fairly simple questions: 

•  Is the worker free to perform work or services without company direction? 
•  Is the worker performing a job that is outside the company’s usual business activities? 
•  Does the worker usually perform work of a similar nature? 

If all three answers are “yes” then it is likely the worker will be exempt from AB5. But rarely is this the case. Hospitality businesses like restaurants and hotels often must classify their staff as employees and must buy worker’s compensation plans. Still, if this proves too expensive, there is always the option of using the services of a staffing agency. 

Staffing firms like Culinary Staffing Service allow your business to bypass much of the AB5-related compliance concerns because all staff are agency employees, and thus it is the agency that is responsible for any and all compliance issues that fall under California law. 

You can read more about AB5 HERE, and call us if you have any questions or concerns.

Laws change and times change, but we are here to keep you informed and make sure your business is protected.

Reach us at (323) 986-6590