California’s “Gig Worker” Bill
The information provided in this blog post does not, and is not intended to, constitute legal advice. Please consult with your own legal counsel on your situation.
For those of us working in California, the “Gig Worker Bill”—California Assembly Bill 5 (AB5)—may have an impact on businesses that regularly use independent contractors like many QRCA members. If you are not in California, legislation like this may be on the horizon in your home state. Here is some background and my take on the types of business relationships we maintain and how to be prepared.
1989 California Supreme Court's decision in Borello vs. Dept. of Industrial Relations (https://law.justia.com/cases/california/supreme-court/3d/48/341.html) was the original pivot point in determining whether or not “gig workers” are considered independent contractors. This established the first guideline for who is considered an independent contractor and who is not in the state of California, growing around agricultural seasonal workers in the state. Under this test, the most significant factor was whether the hiring firm has the right to control the contractor, both the work done and the manner and means in which it is performed.
If you work on an ad hoc basis, manage yourself without oversight and maintain your own hours, buy your own materials and equipment, and are performing work not regularly done in-house by your client’s firm, then you pass the first test. Personally, I would also argue my services to be distinct from my client’s business, although I do work for other research firms, due to my special focus on qualitative, my specialized training (great note for QRCA Advance Program) and unique skill set. This is likely the same situation for you.
Furthermore, in a business-to-business relationship, AB5 also considers business service providers independent contractors if (1) they pass the Borello test (sometimes referred to as the ABC test) and (2) satisfy the following long list of criteria. (The sections in italics are my thoughts and suggestions.)
- Free from the hiring firm's control and direction while performing the work; I might advise you to set forth language that covers this concept in all your contracts. I have added this to my contracts that specifically states I am an independent contractor contracting with XYZ company.
- Provides services directly to the contracting business rather than to customers of the contracting business.
- Provides a signed written contract before services begin; If you have a handshake relationship, I suggest you create an extended term contract to cover you for a one-year period or start executing contracts for every project “gig” starting now.
- Has all required business licenses or business tax registration; Even if you are a DBA, make sure your business name is added to your 2020 tax forms. If you haven’t applied for an assumed business name, do so immediately; the cost is less than $100.
- Maintains a business location separate from the business or work location of the hiring firm; Think about working from home 51% of the time (at least as far as the state of California is concerned).
- Customarily engaged in an independently established business of the same nature as that involved in the work performed; If you work for just one company exclusively, this puts you and your client at risk for being labeled an employee.
- Contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from client’s firm.
- Advertises and holds itself out to the public as available to provide the same or similar services; The previous three bullets are very similar but all three must be met—so if you are working for just one client all year, do at least one other, not pro-bono, project in case you are queried by the state tax board.
- Provides its own tools, vehicles, and equipment to perform the services.
- Negotiate your own rates.
- Is consistent with the nature of the work, can set your own hours and location of work.
- Is not performing the type of work for which a license from the State of California is required; General business management consultants, SIC code 8742, are not required to have special licenses like CPAs or construction contractors, but everyone who consults should have a business license in the state of California.
Now there is much controversy surrounding AB5 over who is really an independent contractor and how the legislation was written, some say in haste. The definitions of exempt workers in AB5 were not well thought-out and horribly incomplete. The list of exemptions does not call out research consultants like it does for some other types of consultants like lawyers (legal consultants) or content designers.
Just after the law was passed, another state assembly bill was quickly introduced to expand the exempt categories and clarify some of the language. A quick glance leaves me feeling this is still insufficient. At least two more bills are currently being written to repeal and/or revise AB5.
If you would like to read one of the most recent proposed bills that could be relevant to your independent contractor status, here’s the new name to remember: California State Assembly Bill 806 https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB806
I found this article by NOLO Press to be very informative. NOLO is a fabulous resource for small business owners. https://www.nolo.com/legal-encyclopedia/exempt-job-categories-under-californias-new-ab5-law.html
Monica Zinchiak has been a California Girl her entire life and has been an independent consultant for the last 25 years, DBA Z. Research Services. She helps her clients get in touch with the real lives, experiences, and needs of their customers. An early adopter of online qualitative methods, she has a special focus in Online Qual, conducting primary market research studies for Fortune 500 companies, top-tier market research firms, advertising agencies, and remarkable start-ups. An active member of the Qualitative Research Consultants Association (QRCA), she is a past president for the organization.