With respect to worker’s compensation, California Assembly Bill No. 5 (AB5) went 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. The AB5 places a burden of proof for hiring entities to classify individuals as independent contractors, not employees, by using a three-pronged test known as the “ABC Test”.
The ABC Test:
- The worker 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.
- The worker performs work that is outside the usual course of the hiring entity’s business.
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
It is very important that employers determine the correct status of their workers. If insurance carriers find workers who are regarded by you as independent contractors, but are actually considered by law to be “employees”, the carriers will include their compensation in the workers’ compensation premium.
Questions about AB5?
- California Labor Code and Unemployment Insurance Code may be accessed at http://leginfo.legislature.ca.gov.
- California Labor & Workforce Development Agency webpage at https://www.labor.ca.gov/employmentstatus/ for more information.
Should you have any questions, please contact ProAction Insurance Services at 951-898-9892 or email email@example.com.