If you are considering hiring a nanny or home caregiver in California, or if you already employ one, it’s important to understand how the state’s labor laws impact your agreement. Specifically, Assembly Bill 5 (AB5) affects the classification of domestic workers and requires employers to be diligent in setting up wage and hour requirements. 

Though AB5 has been in effect for over 3 years, issues continue to arise for nannies, home caregivers, housekeepers, and other relative home-based jobs. Here is what household employers need to know about this pivotal law and the benefits that must be offered to avoid the potential risks of worker misclassification. 

What is Assembly Bill 5 (AB5) 

Assembly Bill 5 (AB5) is a California employment law that went into effect on January 1, 2020. The law addresses the classification of workers as independent contractors instead of employees and codifies the “ABC” test (as set forth by Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) ruling) to determine whether a worker is an independent contractor or an employee. This distinction is important. As employees, you need to have them on payroll, receive benefits and wages, and are required to follow specific guidelines. Conversely, independent contractors tend to have more flexibility in scheduling but do not receive benefits like health insurance or paid time off. 

Under the “ABC” test, a worker is presumed to be an employee unless the hiring entity can prove that: 

1. The worker is free from the control and direction of the hiring entity in connection with the performance of work,
2. The worker performs work that is outside the usual course of the hiring entity’s business, AND
3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. 

AB5 has caused controversy across a wide variety of industries, with some arguing that it restricts worker flexibility and makes it harder for companies to hire independent contractors. However, others argue that the bill helps protect workers by ensuring they receive the necessary benefits and protections that come with employee status. Regardless of your stance, if you are hiring someone, it’s crucial to thoroughly examine the employer-worker relationship to ensure compliance. 

How AB5 Affects Nannies and Domestic Workers 

People who engage domestic employees, such as nannies and other household workers, must carefully structure their relationship with each worker and determine if the services the worker is providing require them to be classified as an employee rather than as an independent contractor.

Prior to AB5, many nannies and other household workers were often – albeit sometimes improperly – classified as independent contractors, meaning they were not entitled to certain benefits and protections that employees receive, such as minimum wage, overtime pay, sick leave, and workers’ compensation benefits. 

Under AB5, classification as an employee is the default. Due to the level of control families exercise over how nannies and other household workers do their jobs, it is all but impossible for families to properly classify these workers as independent contractors. As a result, many families must take immediate steps to properly classify these workers as employees and provide the employee with benefits and protections that California employees are entitled to by law. 

It is important to note that there are some exceptions to AB5, such as certain licensed professionals, so families and individuals should consult legal professionals to understand how these positions are affected.

Key Takeaways

AB5 violation lawsuits are surprisingly expensive and time-consuming for all parties involved. But when the conflict enters the home, it can be even more stressful as these relationships are often much more personal. To protect yourself, your family, your business, and your domestic workers, dedicate time to understanding how AB5 applies to your home and the people that help maintain it. 

Whether you are considering hiring a nanny or home caregiver or have existing household employees, Hackler Flynn & Associates is here and happy to help guide you with an independent contract analysis. Contact us today to get started.

 

 

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