California businesses face new rules over use of contractors

Frank S. Clowney III

Companies in the Golden State will face strict new regulations over their use of independent contractors after Gov. Gavin Newsom signed a bill into law, which will go into effect on Jan. 1, 2020.

According to a report by the LA Times, supporters say the law will reduce the misclassification of workers as independent contractors, who aren’t eligible for benefits such as health insurance and sick leave.

What criteria will be used to classify workers?

The new law uses a 2018 California Supreme Court decision to establish criteria for classifying workers. Under the law, a worker must be considered an employee when:

  • Their job is part of a company’s core business
  • Supervisors direct their work
  • The worker has not established their own company or trade
Some exemptions are allowed under the law

The new employee rules will not apply to several professions, including:

  • Doctors
  • Accountants
  • Architects
  • Real estate agents
  • Travel agents

Other professions are exempt with certain conditions:

  • Commercial fishers must still pay unemployment insurance
  • Barbers, cosmetologists and manicurists who are paid directly by clients, set their own rates and schedule their own appointments
  • Salespeople if their pay is based on actual sales and not wholesale purchases
Challenges expected over the new law

While the new law tries to set strict standards for classifying workers, several industries could create some enforcement challenges. The City of San Diego recently filed a lawsuit against the grocery delivery company Instacart saying it has wrongfully classified workers.

The complexities of the law may be a challenge for companies leading up to and after it goes into effect in January. An experienced employment law attorney here in California can help employers review their policies over worker classification and how the new law may impact them.