AB5 Causes Employers to Beware of Who Can Be Hired as Independent Contractor

Vikita Poindexter

Someone had to deliver the bad news. 

So, human resources expert Vikita Poindexter told a small crowd Nov. 20 several disturbing facts for employers and independent contractors to know for the New Year: 

1.) If you hire someone who does the same work as you, they have to be compensated as an employee; 

2.) If you hire someone as an intern, that person must be paid minimum wage. 

One listener at the gathering at workzones, abruptly left and told the speaker, “Thanks for nothing.” 

Poindexter said the reason for California becoming even more strict about employment law is the passage of state Assembly Bill 5, or AB5, which is aimed at more fairly compensating independent contractors such as Lyft and Uber drivers. 

Many contractors are excluded from the law, including hair stylists who have a strong lobby in Sacramento. However, not excluded are many truckers and freelance writers. 

Poindexter said some workers who were classified as contractors will now have to designated as employees and the fines for not compensating them properly are “astronomical” and retroactive. 

She said it is a felony to have no workers compensation for such hires because the federal and state governments want the money. If the matter goes to court and an employer loses, the employer must also pay all attorney fees, Poindexter said. 

The Inland Empire-based speaker said the way to avoid AB5-related problems is to avoid hiring workers who don’t do what the employer does. For example, a website blogger should not hire another blogger, but can hire designers to prevent them from being considered employees. 

In general, Poindexter said, interns will be considered employees who must be paid minimum wage, which will be $13 an hour in 2020 and increase to $15 in 2023. 

Many independent contractors are exempt from AB5, Poindexter said, including insurance sellers, doctors, lawyers, private investigators, architects and commercial fishermen, among others who also have strong lobbyists. 

Poindexter said AB5 is a law that must be refined by employers contacting their elected officials and lobbying for changes. 

Her advice was, “Outsource what you can’t physically do.” She advised against employers trying to do everything themselves. “Don’t be afraid to outsource what you don’t know how to do,” she said. 

However, she added, “Do not outsource your core business to individuals.” 

The gathering at workzones was sponsored by the Santa Barbara chapter of the National Association of Women Business Owners.

Posted Nov. 21, 2019.

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