California Updates ABC Test Exemptions

On September 30, 2021, California updated its exceptions to the law that regulates independent contractor classification (AB 5). AB 5 requires a three-part test, also known as the ABC test, to determine whether workers are employees or independent contractors.

When an exception to the ABC test applies, employers need to revert to previous multifactor determination worker classification methods. Updates to the exceptions become effective on January 1, 2022.

Updated Exceptions

• Licensed manicurists – The exemption was set to expire on January 1, 2022; the update extends the exemption through January 1, 2025.
• Construction trucking services – Specific requirements apply. The exemption applies to work performed before January 1, 2022. The update extends the exemption to work performed before January 1, 2025.
• Data aggregators – Specific conditions apply. The amendment revises the exemption to apply to the relationship between a data aggregator and a research subject. The update removes the requirement that any consideration paid for the feedback provided if prorated to an hourly basis is equivalent to or greater than the minimum wage.
• Insurance-related services – The amendment expands the exemption to persons who provide claims adjusting or third-party administration.
• Manufactured housing salespersons – The update clarifies that employers should not consider the statutorily imposed duties of a manufactured housing dealer as factors under the multifactor test.

Impact on Employers

Employers should become familiar with the ABC test, its exemptions and the updates that become effective in 2022.

Important Dates

January 1, 2020 – effective date for AB 5 (and the ABC test) across the state of California.

September 4, 2020 – California expanded the list of occupations exempt from AB 5.

September 30, 2021 – California amends some exemptions to AB 5. The updates become effective January 1, 2022.