In recent months, Assembly Bill 5 has remained one of the central topics in the California courts. Worker misclassification lawsuits have increased due to the new worker classification standard set forth by AB5. And gig economy companies like Uber and Lyft have tried to fight AB5 in court only to be unsuccessful. So far, the main focus for news cycles have focused on gig economy drivers, but how does AB5 affect other professions? Or more specifically, how does AB5 affect attorneys?
Assembly Bill 5
To recap, Assembly Bill 5 (AB5) is a state law that’s been in effect since January 1, 2020 and codifies the “ABC” test. This test determines whether a worker is an employee as opposed to an independent contractor. The test states that for the hiring entity to classify a worker as an independent contractor, it must demonstrate that all the following conditions are satisfied:
- The person is free from the control and direction of the hiring entity in the performance of the work.
- The person performs work that is outside the usual course of the hiring entity’s business.
- The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Based on the Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) ruling, the “ABC” test radically changes 30 years of worker classification law from the multi-factor test set forth in the California Supreme Court case entitled S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) (“Borello”). Parts B and C are two new factors that were never before part of California’s independent contractor analysis under Borello.
Contract Attorneys are Exempt
Since AB5 impacts the determination of who qualifies as an independent contractor, contract attorneys – and those who hire contract attorneys – are certainly interested in how AB5 affects them.
Part “B” is the biggest issue with the ABC Test. Under part B, a company can never hire an individual as an independent contractor if they perform work that is within “the usual course of the hiring entity’s business.” This means that a lawyer cannot be an independent contractor if working for another lawyer. Part B makes sense when dealing with workers who need protection, but it quickly defies logic when dealing with licensed professionals. As a result, AB5 exempts certain occupations, categorizing them as “Occupational Exemptions” that must be governed by the Borello test instead.
So, the good news is that all licensed attorneys, including contract lawyers, fall under “Occupational Exemptions” and may be classified as independent contractors as long as they can satisfy the Borello test.
In light of AB5, law firms working with contract lawyers or attorneys should exercise caution and keep the Borello test in mind. Those hiring contract lawyers or attorneys should engage legal counsel to assist with an independent contractor analysis and to craft independent contractor agreements that clearly demonstrate that the attorney meets the applicable standards to avoid potential litigation.
If you need any assistance with an independent contractor analysis or crafting a legally compliant independent contractor agreement, contact Hackler Flynn & Associates.
Do you have independent contractors?
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DISCLAIMER: Content within this post should not be considered legal advice and is for informational purposes only. Communications made through this post do not create an attorney-client relationship. Hackler Flynn & Associates is not responsible for any content that you may access from third-party resources that may be accessed through or linked to this post. Hackler Flynn & Associates is only licensed to practice in California.
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