© 2020 American Payroll Institute, Inc. California Governor Signs Amended Worker Classification Law Tamending he governor of California recently signed legislation A.B. 5, the worker classification law that originally went into effect January 1, 2020 [A.B. 2257, L. 2020 Office of the Governor, News Release, 9-4-20]. The amendments took effect on September 4, 2020. A.B. 5 applied the employee-friendly ABC test to worker classification under the Industrial Welfare Commission wage orders and for purposes of state wage and hour, unemployment insurance (UI), and workers’ compensation laws (as of July 1, 2020 see PAYSTATE UPDATE, Issue 19, Vol. 21). The amended law applies the ABC test for state taxation purposes, adds additional categories of exempt occupations and industries, expands enforcement mechanisms, and provides clarification about the business-to-business exemption. Exemptions A.B. 5 originally exempted certain occupations and industries from applying the ABC worker classification test. The more employer friendly Borello worker classification test applies to the exempted occupations and industries, although an employer might need to fulfill additional requirements before the exemption applies. The California Labor and Workforce Development Agency outlines those requirements in a FAQ webpage on its Employment Status Portal. The amended law creates additional exemptions, including certain occupations within the music industry musicians or musical groups for the purpose of a single- engagement live performance event individual performance artists licensed landscape architects freelance translators registered professional foresters home inspectors certain occupations related to underwriting and risk management in the insurance industry manufactured housing salespersons persons engaged in conducting international and cultural exchange visitor programs competition judges with specialized skill sets digital content aggregators who serve as licensing intermediaries for digital content specialized performers hired to teach master classes and feedback aggregators. The amended law also alters some of the existing exemptions by limiting them to workers under written contracts with certain required provisions and additional restrictions. The exemption for licensed manicurists will only apply until January 1, 2022, and the exemption for commercial fishermen will only apply until January 1, 2023. Tax law application The amendments incorporate the ABC test into state tax law. The California Franchise Tax Board already directs employers to apply the ABC test on its Worker classification and AB 5 FAQ webpage, but the amendments formalize that standard. Enforcement expansion The original law allowed the state attorney general or a city attorney of a large city (i.e., more than 750,000 residents) to file for an injunction, such as the injunction sought against Uber and Lyft (see PAYSTATE UPDATE, Issue 17, Vol. 22). The amended law allows any district attorney in the state the same privileges, which may result in an increase in enforcement across California. Business-to-business exception The original law provided for a business-to-business exemption for certain businesses (i.e., business service providers) that provide services solely to other businesses (i.e., contracting businesses). The amendments clarify that the business-to-business exemption only applies to business entities and not to individuals working for those entities. Each business still needs to apply the ABC test when classifying individual workers within their own organization, so long as a separate exemption does not apply. The amended law clarifies that business service providers are not required to contract with other businesses to provide the same services in order for the exemption to apply. The business service provider only needs to have the ability to contract with other businesses, even if it does not do so. Ballot measure In November, voters will determine whether additional exemptions will apply to app-based transportation and delivery drivers (e.g., workers for companies like Uber, Lyft, Instacart, DoorDash, Postmates). A ballot measure, Proposition 22, would exempt those occupations from the worker classification requirements of A.B. 5. COVID-19-Related Wage Garnishment Updates Ipublic n response to changing conditions related to the COVID-19 health emergency, jurisdictions have updated relief efforts related to wage garnishments (see PAYSTATE UPDATE, Issue 10, Vol. 22), including creditor garnishments, tax levies and other administrative wage garnishments, and student loan garnishments. Some suspensions of garnishment orders have expired and others have been extended for additional time. September 14, 2020 Volume 22 Issue 18
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