Assembly Bill 5 (AB5)

California recently adopted Assembly Bill 5 (AB5), authored by Asm. Lorena Gonzalez (D-San Diego). AB -5 places into law an independent contractor test known as “ABC” test. In order to be considered an independent contractor, a worker must satisfy all 3 parts of the test.

A. The person is free from the control and direction of the hiring entity, both in contract and in fact.

B. The person performs work for that is outside the usual course of the hiring entity’s business.

C. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

Certain independent contractors, such as insurance agents, physicians, attorneys, accountants, engineers, and direct sellers were placed under a different test. With a few exceptions, the relationship between independent truckers and their carriers, brokers and shippers will be governed by the “ABC’ test. If you are in construction trucking you can still work as an owner-operator, but only under the following circumstances until January 2022.

The ‘ABC’ test shall not apply to a subcontractor providing construction trucking services for which a contractor’s license is not required if all the following are satisfied:

  • The subcontractor is a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation.
  • For work performed after January 2020, the subcontractor is registered with the Department of Industrial Relations as a public works contractor, regardless of whether the subcontractor involves public work.
  • All construction trucking services must be performed by employees, unless the subcontract and holds a valid Motor Carrier Permit.
  • The subcontractor negotiates and contracts with, and is compensated directly by, the licensed contractor.

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