What Is the New 2020 California AB5 Law?
In September of 2019, California legislators passed Assembly Bill 5, effectively making it difficult for businesses to classify workers as independent contractors when it went into effect at midnight on December 31st. Lorena Gonzalez, the assemblywoman who authored the bill, says that it “seeks to eliminate exploitative permalance positions, not legitimate freelance opportunities.” She is referring to open-ended contract positions without benefits.
The bill requires employers to use an “ABC test” to determine whether workers are employees. This test classifies workers as employees if:
- They perform their work duties under a company’s control
- The work they do is integral to the company’s business
- The workers do not have independent enterprises in their trade
Another way to look at the ABC test is in terms of how a business can demonstrate that a worker is not an employee. If a worker is not under the control of the hiring entity, performs work that is outside the typical course of the company’s business, or is generally engaged in an independently established trade related to the work they perform for the business, they may be considered to not be an employee.
By labeling workers as employees, they become entitled to certain benefits like workers’ compensation, expense reimbursement, paid sick and family leave, minimum wage, and unemployment insurance.
Employers are also required to pay half of their employees’ Social Security Tax. Employers and freelancers alike are up-in-arms about the new legislation, as they question how this affects their work and their bottom line.
How AB5 Affects Freelancers, Contractors, and Businesses in California
If you are a Californian who makes your living through independent contract work, you likely face many questions about how the law affects you. The way in which this new law affects different types of freelancers is varied.
Freelance writers and photographers submitting more than 35 articles or photos per year to any outlet would need to be hired as employees. The fear is that many outlets will stop using freelancers to avoid non-compliance with AB5. Some companies, such as Vox Media have already dropped hundreds of freelancers. Others have already decreased the workload they give to freelance employees, so that they remain in compliance with the new bill.
Another issue with the bill is that even if companies hire former freelance workers full time, many will not be able to take the jobs. Some have physical disabilities which prevent them from taking full time work, while those who could work full time would face losing social security and other government disability benefits. Many freelance workers are well beyond the typical retirement age. Companies hiring full-time employees are not likely to select these candidates for the positions they need to fill.
Companies like Uber and Lyft provide jobs on demand without needing to offer the benefits that most part-time and full-time companies offer. These businesses have built massive networks of independent contractors who do their driving, shopping, and deliveries. Uber feels that their drivers are correctly classified as independent contractors but has also tasked company volunteers with developing new app features specific to California. These new features would allow drivers certain new abilities, like being able to see estimated trip fares and rejecting trips with no penalty.
Reaction From California Businesses
Businesses are upset about the new bill because the benefits they now must offer to former contract workers can add 30% to their labor costs. It also limits the flexibility they once enjoyed by hiring freelancers to perform many necessary tasks. Some companies, such as Uber and Lyft, are saying that their workers still qualify as independent contractors under the ABC test. They are planning to argue their case in court, stating that they will not reclassify their workers unless a judge compels them to do so.
Most businesses fear that they will see an increase in independent contractors bringing wage and hour law claims and class action suits. These claims could include meal and rest break claims, overtime, and wage statement claims, among others.
Reaction From Freelancers and Contractors
Many contract workers are suing the state of California to protect their livelihoods. Organizations that represent freelance journalists and photographers argue that AB5 limits free speech under the U.S. Constitution. The bill affects workers in industries from technology and trucking to entertainment and music. Over 5,000 interpreters and translators signed an open letter to California lawmakers, asking to remain classified as independent contractors but were denied.
The California Trucking Association sued the State of California in an attempt to prevent the application of the ABC test in the truck driving industry and challenge the AB5 law. They have been granted a temporary restraining order on the enforcement of AB5 against motor carriers until the court resolves the motion they have, along with two owner-operator co-plaintiffs for a preliminary injunction.
Virtual Assistants Are a Great Hiring Alternative
If your California business is struggling to adjust to the new changes associated with AB5, you may want to consider the option to hire virtual assistants outside of California. This alternative allows your business to work with freelancers and save money on your bottom line. You can also avoid the added costs and complications of adding staff to your payroll as part-time or full-time employees.
Remote team members save companies thousands of dollars a year on overhead expenses. General Virtual assistants take phone calls, make outgoing calls, handle scheduling duties, and perform a variety of bookkeeping tasks, which can save your company’s actual employees valuable hours that they can spend on more productive work. Virtual assistants work remotely, and oftentimes outsourcing work to one makes you their client, which saves you the trouble of payroll taxes, benefits, and fees.
The Reason Why Virtual Assistants Can Avoid Compliance With AB5
When we take a look at the way in which a company can show that a worker is “not” an employee, we find that hiring a personal virtual assistant from Latin America becomes a viable choice in filling company needs, without having to classify a worker as an employee under the new law. Since virtual assistants are not under the direct control of your company, they are essentially performing their duties under the control of a third party entity, such as Virtual Latinos. This rules out the first condition of the ABC test.
Virtual assistants also perform duties for various other companies, which is not at all related to the work they would be doing for your company. This satisfies the second marker that we can use to determine that your assistant is not an employee of your company. Last, virtual personal assistants, such as those available to your company through Virtual Latinos, are engaged in an independently established trade. The duties they perform for your company are the same ones that they perform for various other companies around the country, which classifies them as independent contractors, acting as assistants to multiple businesses besides your own. This satisfies the last part of the ABC test.
Save Your Business Money by Hiring a Virtual Assistant From Latin America
Quality personal assistants from Latin America offer a variety of services that benefit your company in a multitude of ways. Virtual Latinos virtual assistants are experienced college graduates, who are fully bilingual and prepared to meet your clerical needs. This allows your employees to accomplish important tasks, devote time to satisfying clients, and meet company goals on or ahead of schedule.
Virtual Assistants cover time-consuming tasks for your company, such as digital marketing, social media, and email blasts. They also complete online research, marketing automation, CRM management, and a host of bookkeeping tasks that can eliminate multiple full-time employees—or replace contractors who live in California.
The ways in which virtual assistants can save your company money are numerous. As they are not legally required to be labeled as employees of your company, you as a business owner are not required to invest crucial company funds in paid employee benefits. The social security tax, unemployment insurance, workers’ compensation, expense reimbursement, paid sick leave, and myriad other perks that come out of company revenues for actual employees do not have to be paid to virtual personal assistants. So, as you can see, the money your company will save over the course of a year leads to a direct increase in your business profits. Virtual Latinos can cover the tedious duties your company needs to accomplish every day, without costing you the expense of employee benefits you would need to pay in-house employees.
Let Virtual Latinos Do Your Recruiting for You
Virtual Latinos can connect you with passionate virtual assistants, allowing your company to focus on running the business efficiently. With Virtual Latinos, you will find talented and motivated workers who have completed a demanding, high-quality training program.
As a top virtual assistant hiring service, we hand pick the best applicants available after sifting through all the applications we receive. Our top applicants have the opportunity to join our US-based digital marketing and certifications programs. We offer the flexibility of hiring assistants directly with no middleman, or through our assisted hiring services. We work in countries like Mexico, Costa Rica, and Chile, which are in or close to your time zone. This eliminates confusion over deadlines and schedules.
Most importantly, we are one of the most affordable options you will find. Our virtual assistants are 40%-75% less expensive than US-based assistants, and our marketers are 30%-50% less expensive than freelance and in-house marketers in the US.
Virtual Assistants Offer an Alternative to CA Freelancers
Contact Virtual Latinos now to find out how we can meet your company’s needs and give your employees extra time to focus on your clients and help your business to grow. Best of all, our virtual assistants afford your company the opportunity to contract these duties out, with no consequence to the AB5 Law. Virtual Latinos are one of the best-kept secrets in the business world, but we would love to share our experience and quality work with you and your company.