California’s AB5 was originally published with an initial list of exemptions including doctors, dentists, insurance agents, lawyers, accounts, real estate agents, and hairstylists. Following massive lobbying from unions and large companies, AB2257 was introduced which significantly broadened the exceptions list than were present in the original law.
These exceptions relate to the types of workers who are exempt from passing the ABC test in order to be considered independent contractors but still need to meet the Borello worker classification test.
This article is part of our guide on Assembly Bill 5 (AB5).
What led to the introduction of AB2257?
After AB5 went into effect, companies working with freelancers that were not exempt, had to pass the strict ABC test in order to be defined as independent contractors. Unfortunately, the strict workforce classification test changed the definition of many freelancers and independent contractors to employees. The almost instant change in their relationship was devastating and completely overhauled their business models.
The freelancers and independent contractors that were exempt only had to meet the Borello classification test, which was the previous classification test and didn’t change the status quo.
Companies and industries affected by AB5 began public relations campaigns and lobbying efforts to have more exemptions added to AB5. This is because they had to stop working with many of their freelancers or define them as employees. This was disastrous for many due to changes in pay structure, added benefits, and forming long-term relationships although that was not the original intention.
34 stand-alone bills were introduced in an attempt to add new fields and professions into the list of exceptions. Most of the bills were accepted as the larger overhaul of AB5, otherwise known as Assembly Bill 2257 (AB2257).
Who is now exempt from the ABC test under AB2257?
As we’ve discussed, AB2257 made amendments to the AB5 exemptions list by adding 15 new categories of workers.
- Recording artists
- Performing arts
- Landscape architecture
- Translation of documents
- Copy-editing and illustrations
- Registered professional forestry
- Real estate appraising
- Home inspections
- Insurance underwriting inspections, auditing, and risk management and loss control
- Manufactured housing sales
- International and cultural exchange services
- Competition judging
- Digital content and feedback aggregation
- Teaching of master classes by specialized performers
However, it also broadened and clarified a few categories of exempt industries. Here are the main changes:
#1 The Business-to-Business Exemption
AB5 in its original form included an initial Business to Business (B2B) exemption clause. It was designed to legitimate contracting between two business entities from being subject to the ABC test. However, it required meeting 12 criteria in order to satisfy the exemption. The AB2257 version of the law clarified and extended 6 out of the 12 requirements.
Things are still quite complicated on this front. This is because contractors are still required to fulfill the 12 (very) specific requirements for this exemption, therefore leading to the fact that still too many, in the end, are not exempt.
#2 “Single Engagement” Business-to-Business Exemption
The exemption deals with single engagement deals. This exemption relates to individual business owners that enter into work contracts “for purposes of providing services at the location of a single-engagement event.” If the right criteria are met, these contractors won’t have to meet the ABC test. This exemption is relevant in the circumstances that the event under discussion is “a stand-alone non-recurring event in a single location or a series of events in the same location no more than once a week.”
#3 The Entertainment/Music Industry Exemptions
AB2257 set out a new range of exemptions in the entertainment industry and specifically in the music world.
The list of who is now exempt from the ABC test includes recording artists, songwriters, lyricists, composers, proofers, recording artist managers, record producers and directors, musical engineers and mixers, musicians, vocalists, photographers, independent radio promoters, as well as certain types of publicists.
The new rules for the music industry didn’t stop there. In an effort to improve the situation for gig workers for one-off shows, musicians and musical groups that are working for a single live performance became exempt from the ABC test under AB2257 (granted that they meet requirements… of course!).
Lastly, extending beyond the music industry, individual performance artists such as storytellers, comedians, magicians, illusionists, and more who perform original work are exempt under certain conditions.
#4 The Referral Agency Exemption
An exemption for referral agencies already existed in AB5, but AB2257 clarified and expanded it.
To get started, AB2257 includes new referral services that may be exempt from the ABC test. These include event planning, sports coaching, interpreting services, and more. These exemptions are now subject to the Borello test only, which is much more flexible than the ABC test. This is a major advancement in the AB5 law and one that allowed a much wider range of businesses to enjoy independent contractor status.
Many consider this change to be one of the most significant in AB2257.
#5 The Professional Services Exemption
Just like the other exemptions under AB2257, the professional services exemption expands the (already relatively large) list of occupations in the field that are exempt from the ABC test. The new list of occupations will be subject to the Borello test and include content contributors, producers, advisors, narrators, performers that are teaching a class for no longer than a week, home inspectors, appraisers, and registered personal foresters.
Another important achievement in AB2257 revolved around the journalism industry. One of the most ridiculous parts of AB5 (according to both employers and workers themselves) was the limit of number of “submissions” that a creative could do in a year. AB2257 removed the cap.
Other Exemptions and Clarifications
There are other various exemptions in AB2257 that don’t fit into a specific category. These exemptions include competition judges, manufactured housing salespersons, and certain people that are involved in international exchange programs.
AB2257: Expanding the list of exemptions from AB5
AB2257 is another significant update of AB5. The original law has undergone many changes, to the point that for many it is no longer recognizable and our estimation is that it will continue to change and evolve due to pressures from unions and large companies.