The California Legislature Approves Assembly Bill 2257 for ABC Test


The California Legislature has now approved Assembly Bill (AB) 2257, which clarifies and expands the exemptions for the three-part ABC test established under AB 5 for determining employment status of independent contractors (ICs). The ABC test was established in April 2018 by the California Supreme Court in the Dynamex Operations West, Inc. v. Superior Court decision. The California Legislature then worked to interpret the ABC test, expanding its scope through AB 5 in late 2019. Now that the AB 2257 has been approved, it will cross the Governor’s desk for final authorization.

The ABC test considers all workers to be employees rather than ICs unless the hiring party can demonstrate all three conditions set forth in the test. Since its enactment, this test has proven difficult to pass, even with the number of exemptions enacted by AB 5. If a company qualifies for one of these exemptions, then a less stringent, multi-factor balancing test is used to determine employment status.

Building on the work of AB 5, AB 2257 has added new occupation-specific exemptions and clarified exemption categories. There were also key updates made for those providing professional services, including:

  • - Clarification on business license and tax registration requirements of select services
  • - Modification of six specific requirements that must be met for all of the designated professional services to gain exemption
  • - Retention of the previous exemption requirements for several occupations
  • - Addition of new occupational exemptions
  • - Alteration of the business-to-business exemption to better clarify eligibility requirements

As impactful court cases and legislative action continue to effect employment classification standards in California, it’s more important than ever for companies to stay informed. Companies that do business in California must be agile when accommodating employment status updates and carefully vet the ICs they want to work with, to ensure compliance and avoid serious penalties.

For more information on the ABC test and AB 2257, download PRO Unlimited’s Compliance Alert today.

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Disclaimer: The content in this blog post is for informational purposes only and cannot be construed as specific legal advice or as a substitute for legal advice. The blog post reflects the opinion of PRO Unlimited and is not to be construed as legal solutions and positions. Contact an attorney for specific advice and guidance for specific issues or questions.