On Sept. 30, 2021, California updated its exceptions to the law that regulates independent contractor classification (AB 5). AB 5 needs a three-part test to figure out whether employees are workers or independent contractors. The test is referred to as the ABC test. Read on to understand the updated ABC Test exemptions better.

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 Jan. 1, 2022.

Essential Dates

Jan. 1, 2020

Effective date for AB 5 (and the ABC test) across the state of California.

Sept. 4, 2020

California expanded the list of occupations exempt from AB 5.

Sept. 30, 2021

California amends some exemptions to AB 5. The updates end up being efficient Jan. 1, 2022.

Updated ABC Test Exemptions

• Licensed manicurists—The exemption was set to expire on Jan. 1, 2022; the update extends the exemption through Jan. 1, 2025.

• Construction trucking services—Specific requirements apply. For example, the exemption applies to work performed prior to Jan. 1, 2022. The update extends the exemption to work carried out before Jan. 1, 2025.

• Data aggregators—Specific conditions apply. The amendment modifies the exemption to apply to the relationship between a data aggregator and a research subject. The update eliminates a certain requirement regarding paid consideration. So, hourly prorated payments no longer need to be equal to or greater than minimum wage.

• Insurance-related services—The amendment expands the exemption to persons who supply claims adjusting or third-party administration.

• Manufactured housing salespersons—Employers should not consider the statutorily imposed duties of a made housing dealership as elements under the multifactor test.

ABC Test Exemptions Impact on Employers

Employers ought to become acquainted with the ABC test, its exemptions and the updates that end up being effective in 2022.

For more information regarding Independent Contractor Classification speak to a TPG Payroll & HR Services Specialist by calling 909.466.7876 today! We will keep an eye out for further updates on California’s contractor laws and regulations. Our wish is for you and your business to succeed, that’s why we have also crafted the Time and Attendance Software available for you check out now!