Bill Text: CA SB900 | 2019-2020 | Regular Session | Amended

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Bill Title: Department of Industrial Relations: worker status: employees and independent contractors.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2020-05-15 - May 14 set for first hearing canceled at the request of author. [SB900 Detail]

Download: California-2019-SB900-Amended.html

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Amended  IN  Senate  March 26, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill

No. 900

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Introduced by Senator Hill

January 30, 2020

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An act to amend Section 50.6 of of, to add Article 1.5 (commencing with Section 2775) to Chapter 2 of Division 3 of, and to repeal Section 2750.3 of, the Labor Code, and to amend Section 650 of the Unemployment Insurance Code, relating to employment.

LEGISLATIVE COUNSEL'S DIGEST

SB 900, as amended, Hill. Department of Industrial Relations. Relations: worker status: employees and independent contractors.

Existing

(1) Existing law expressly authorizes the Department of Industrial Relations to assist and cooperate with the federal Wage and Hour Division and the federal Children’s Bureau in enforcing of the federal Fair Labor Standards Act of 1938 within this state.

This bill would recast those provisions and would delete the express authorization for the department to assist and cooperate with the bureau.

(2) Existing law requires a 3-part test, commonly known as the “ABC” test, to determine if workers are employees or independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission. Under the ABC test, a person providing labor or services for remuneration is considered an employee rather than an independent contractor unless the hiring entity demonstrates that the person is free from the control and direction of the hiring entity in connection with the performance of the work, the person performs work that is outside the usual course of the hiring entity’s business, and the person is customarily engaged in an independently established trade, occupation, or business. Existing law charges the Labor Commissioner with the enforcement of labor laws, including worker classification.

Existing law exempts specified occupations and business relationships from the application of the ABC test described above. Existing law, instead, provides that these exempt relationships are governed by the multifactor test previously established in the case of S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.

Existing law exempts from the application of the ABC test certain licensed health care professionals performing professional or medical services provided to or by a prescribed health care entity.

This bill would additionally exempt a licensed professional clinical counselor, licensed clinical social worker, or licensed marriage and family therapist performing professional or medical services provided to or by a prescribed health care entity.

This bill would also exempt amateur athletic officials supervising an amateur sporting contest held by an amateur sports organization.

This bill would also exempt a franchisee, as defined, if certain requirements are met.

Existing law exempts from the application of the ABC test a contract for “professional services,” as defined, if the hiring entity demonstrates that certain factors are satisfied.

This bill would expand the definition of “professional services” to include prescribed security researchers, appraisers, and certified shorthand reporters.

Existing law exempts from the application of the ABC test business relationships between a referral agency and a service provider, as defined, subject to certain conditions. Existing law defines a “referral agency,” for purposes of this exemption, as a business that connects clients with service providers that provide various types of services, including tutoring. Existing law defines a “tutor,” for this purpose, to include a person who develops and teaches their own curriculum.

This bill would expand the definition of “referral agency” to include a business that connects clients with service providers that provide certified interpretation or translation services, as defined. The bill would expand the definition of “tutor” to also include a person who teaches curriculum that is proprietarily and privately developed or provides private instruction or supplemental academic enrichment services by using their own teaching methodology or techniques.

Existing law exempts from the application of the ABC test a direct salesperson as described in provisions governing unemployment insurance if the conditions for exclusion from employment under that section are met. Those unemployment insurance provisions define “employment” for purposes of unemployment insurance, and exempt from that definition the services performed by specified persons, including real estate, cemetery, or direct sales salespersons, if certain conditions are met, including either specified licensure or performing demonstrations and sales presentations of consumer products in the home of the buyer, or sales to a buyer for resale by the buyer or others in the home or otherwise than from a retail or wholesale establishment, as prescribed.

This bill would also exempt from the application of the ABC test a manufactured housing salesperson and correspondingly revise the unemployment insurance definition of “employment” to exclude a licensed manufactured housing salesperson. The bill would further revise the conditions for exclusion to also exempt persons performing demonstrations and sales of products in the home or business of the buyer. The bill would exclude from a retail or wholesale establishment, under these unemployment insurance provisions, a bus, van, or truck from which the individual seller sells specified products.

In addition to the above changes, this bill would repeal and reenact the ABC test and the existing exemptions as a new article of the Labor Code.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Section 50.6 of the Labor Code is amended to read:

50.6.

 The Department of Industrial Relations may assist and cooperate with the Wage and Hour Division within the United States Department of Labor in enforcing the federal Fair Labor Standards Act of 1938 within this state. The department may be reimbursed by the division for the reasonable cost of that assistance and cooperation, subject to the regulations of the Administrator of the Wage and Hour Division and state laws applicable to the receipt and expenditures of money.

SEC. 2.

 Section 2750.3 of the Labor Code is repealed.

2750.3.

(a)(1)For purposes of the provisions of this code and the Unemployment Insurance Code, and for the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(A)The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B)The person performs work that is outside the usual course of the hiring entity’s business.

(C)The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

(2)Notwithstanding paragraph (1), any exceptions to the terms “employee,” “employer,” “employ,” or “independent contractor,” and any extensions of employer status or liability, that are expressly made by a provision of this code, the Unemployment Insurance Code, or in an applicable order of the Industrial Welfare Commission, including, but not limited to, the definition of “employee” in subdivision 2(E) of Wage Order No. 2, shall remain in effect for the purposes set forth therein.

(3)If a court of law rules that the three-part test in paragraph (1) cannot be applied to a particular context based on grounds other than an express exception to employment status as provided under paragraph (2), then the determination of employee or independent contractor status in that context shall instead be governed by the California Supreme Court’s decision in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello).

(b)Subdivision (a) and the holding in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex), do not apply to the following occupations as defined in the paragraphs below, and instead, the determination of employee or independent contractor status for individuals in those occupations shall be governed by Borello.

(1)A person or organization who is licensed by the Department of Insurance pursuant to Chapter 5 (commencing with Section 1621), Chapter 6 (commencing with Section 1760), or Chapter 8 (commencing with Section 1831) of Part 2 of Division 1 of the Insurance Code.

(2)A physician and surgeon, dentist, podiatrist, psychologist, or veterinarian licensed by the State of California pursuant to Division 2 (commencing with Section 500) of the Business and Professions Code, performing professional or medical services provided to or by a health care entity, including an entity organized as a sole proprietorship, partnership, or professional corporation as defined in Section 13401 of the Corporations Code. Nothing in this subdivision shall apply to the employment settings currently or potentially governed by collective bargaining agreements for the licensees identified in this paragraph.

(3)An individual who holds an active license from the State of California and is practicing one of the following recognized professions: lawyer, architect, engineer, private investigator, or accountant.

(4)A securities broker-dealer or investment adviser or their agents and representatives that are registered with the Securities and Exchange Commission or the Financial Industry Regulatory Authority or licensed by the State of California under Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing with Section 25230) of Division 1 of Part 3 of Title 4 of the Corporations Code.

(5)A direct sales salesperson as described in Section 650 of the Unemployment Insurance Code, so long as the conditions for exclusion from employment under that section are met.

(6)A commercial fisherman working on an American vessel as defined in subparagraph (A) below.

(A)For the purposes of this paragraph:

(i)“American vessel” has the same meaning as defined in Section 125.5 of the Unemployment Insurance Code.

(ii)“Commercial fisherman” means a person who has a valid, unrevoked commercial fishing license issued pursuant to Article 3 (commencing with Section 7850) of Chapter 1 of Part 3 of Division 6 of the Fish and Game Code.

(iii)“Working on an American vessel” means the taking or the attempt to take fish, shellfish, or other fishery resources of the state by any means, and includes each individual aboard an American vessel operated for fishing purposes who participates directly or indirectly in the taking of these raw fishery products, including maintaining the vessel or equipment used aboard the vessel. However, “working on an American vessel” does not apply to anyone aboard a licensed commercial fishing vessel as a visitor or guest who does not directly or indirectly participate in the taking.

(B)For the purposes of this paragraph, a commercial fisherman working on an American vessel is eligible for unemployment insurance benefits if they meet the definition of “employment” in Section 609 of the Unemployment Insurance Code and are otherwise eligible for those benefits pursuant to the provisions of the Unemployment Insurance Code.

(C)On or before March 1, 2021, and each March 1 thereafter, the Employment Development Department shall issue an annual report to the Legislature on the use of unemployment insurance in the commercial fishing industry. This report shall include, but not be limited to, reporting the number of commercial fishermen who apply for unemployment insurance benefits, the number of commercial fishermen who have their claims disputed, the number of commercial fishermen who have their claims denied, and the number of commercial fishermen who receive unemployment insurance benefits. The report required by this subparagraph shall be submitted in compliance with Section 9795 of the Government Code.

(D)This paragraph shall become inoperative on January 1, 2023, unless extended by the Legislature.

(7)A newspaper distributor working under contract with a newspaper publisher, as defined in subparagraph (A), and a newspaper carrier working under contract either with a newspaper publisher or newspaper distributor.

(A)For purposes of this paragraph:

(i)“Newspaper” means a newspaper of general circulation, as defined in Section 6000 of the Government Code, and any other publication circulated to the community in general as an extension of or substitute for that newspaper’s own publication, whether that publication be designated a “shoppers’ guide,” as a zoned edition, or otherwise.

(ii)“Publisher” means the natural or corporate person that manages the newspaper’s business operations, including circulation.

(iii)“Newspaper distributor” means a person or entity that contracts with a publisher to distribute newspapers to the community.

(iv)“Carrier” means a person who effects physical delivery of the newspaper to the customer or reader.

(B)This paragraph shall become inoperative on January 1, 2021, unless extended by the Legislature.

(c)(1)Subdivision (a) and the holding in Dynamex do not apply to a contract for “professional services” as defined below, and instead the determination of whether the individual is an employee or independent contractor shall be governed by Borello if the hiring entity demonstrates that all of the following factors are satisfied:

(A)The individual maintains a business location, which may include the individual’s residence, that is separate from the hiring entity. Nothing in this subdivision prohibits an individual from choosing to perform services at the location of the hiring entity.

(B)If work is performed more than six months after the effective date of this section, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession.

(C)The individual has the ability to set or negotiate their own rates for the services performed.

(D)Outside of project completion dates and reasonable business hours, the individual has the ability to set the individual’s own hours.

(E)The individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work.

(F)The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.

(2)For purposes of this subdivision:

(A)An “individual” includes an individual providing services through a sole proprietorship or other business entity.

(B)“Professional services” means services that meet any of the following:

(i)Marketing, provided that the contracted work is original and creative in character and the result of which depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of or necessarily incident to any of the contracted work.

(ii)Administrator of human resources, provided that the contracted work is predominantly intellectual and varied in character and is of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time.

(iii)Travel agent services provided by either of the following: (I) a person regulated by the Attorney General under Article 2.6 (commencing with Section 17550) of Chapter 1 of Part 3 of Division 7 of the Business and Professions Code, or (II) an individual who is a seller of travel within the meaning of subdivision (a) of Section 17550.1 of the Business and Professions Code and who is exempt from the registration under subdivision (g) of Section 17550.20 of the Business and Professions Code.

(iv)Graphic design.

(v)Grant writer.

(vi)Fine artist.

(vii)Services provided by an enrolled agent who is licensed by the United States Department of the Treasury to practice before the Internal Revenue Service pursuant to Part 10 of Subtitle A of Title 31 of the Code of Federal Regulations.

(viii)Payment processing agent through an independent sales organization.

(ix)Services provided by a still photographer or photojournalist who do not license content submissions to the putative employer more than 35 times per year. This clause is not applicable to an individual who works on motion pictures, which includes, but is not limited to, projects produced for theatrical, television, internet streaming for any device, commercial productions, broadcast news, music videos, and live shows, whether distributed live or recorded for later broadcast, regardless of the distribution platform. For purposes of this clause a “submission” is one or more items or forms of content produced by a still photographer or photojournalist that: (I) pertains to a specific event or specific subject; (II) is provided for in a contract that defines the scope of the work; and (III) is accepted by and licensed to the publication or stock photography company and published or posted. Nothing in this section shall prevent a photographer or artist from displaying their work product for sale.

(x)Services provided by a freelance writer, editor, or newspaper cartoonist who does not provide content submissions to the putative employer more than 35 times per year. Items of content produced on a recurring basis related to a general topic shall be considered separate submissions for purposes of calculating the 35 times per year. For purposes of this clause, a “submission” is one or more items or forms of content by a freelance journalist that: (I) pertains to a specific event or topic; (II) is provided for in a contract that defines the scope of the work; (III) is accepted by the publication or company and published or posted for sale.

(xi)Services provided by a licensed esthetician, licensed electrologist, licensed manicurist, licensed barber, or licensed cosmetologist provided that the individual:

(I) Sets their own rates, processes their own payments, and is paid directly by clients.

(II) Sets their own hours of work and has sole discretion to decide the number of clients and which clients for whom they will provide services.

(III) Has their own book of business and schedules their own appointments.

(IV) Maintains their own business license for the services offered to clients.

(V)If the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which they rent their business space.

(VI)This subdivision shall become inoperative, with respect to licensed manicurists, on January 1, 2022.

(d)Subdivision (a) and the holding in Dynamex do not apply to the following, which are subject to the Business and Professions Code:

(1)A real estate licensee licensed by the State of California pursuant to Division 4 (commencing with Section 10000) of the Business and Professions Code, for whom the determination of employee or independent contractor status shall be governed by subdivision (b) of Section 10032 of the Business and Professions Code. If that section is not applicable, then this determination shall be governed as follows: (A) for purposes of unemployment insurance by Section 650 of the Unemployment Insurance Code; (B) for purposes of workers compensation by Section 3200 et seq.; and (C) for all other purposes in the Labor Code by Borello. The statutorily imposed duties of a responsible broker under Section 10015.1 of the Business and Professions Code are not factors to be considered under the Borello test.

(2)A repossession agency licensed pursuant to Section 7500.2 of the Business and Professions Code, for whom the determination of employee or independent contractor status shall be governed by Section 7500.2 of the Business and Professions Code, if the repossession agency is free from the control and direction of the hiring person or entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(e)Subdivision (a) and the holding in Dynamex do not apply to a bona fide business-to-business contracting relationship, as defined below, under the following conditions:

(1)If a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation (“business service provider”) contracts to provide services to another such business (“contracting business”), the determination of employee or independent contractor status of the business services provider shall be governed by Borello, if the contracting business demonstrates that all of the following criteria are satisfied:

(A)The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B)The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.

(C)The contract with the business service provider is in writing.

(D)If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.

(E)The business service provider maintains a business location that is separate from the business or work location of the contracting business.

(F)The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.

(G)The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.

(H)The business service provider advertises and holds itself out to the public as available to provide the same or similar services.

(I)The business service provider provides its own tools, vehicles, and equipment to perform the services.

(J)The business service provider can negotiate its own rates.

(K) Consistent with the nature of the work, the business service provider can set its own hours and location of work.

(L)The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

(2)This subdivision does not apply to an individual worker, as opposed to a business entity, who performs labor or services for a contracting business.

(3)The determination of whether an individual working for a business service provider is an employee or independent contractor of the business service provider is governed by paragraph (1) of subdivision (a).

(4)This subdivision does not alter or supersede any existing rights under Section 2810.3.

(f)Subdivision (a) and the holding in Dynamex do not apply to the relationship between a contractor and an individual performing work pursuant to a subcontract in the construction industry, and instead the determination of whether the individual is an employee of the contractor shall be governed by Section 2750.5 and by Borello, if the contractor demonstrates that all the following criteria are satisfied:

(1)The subcontract is in writing.

(2)The subcontractor is licensed by the Contractors State License Board and the work is within the scope of that license.

(3)If the subcontractor is domiciled in a jurisdiction that requires the subcontractor to have a business license or business tax registration, the subcontractor has the required business license or business tax registration.

(4)The subcontractor maintains a business location that is separate from the business or work location of the contractor.

(5)The subcontractor has the authority to hire and to fire other persons to provide or to assist in providing the services.

(6)The subcontractor assumes financial responsibility for errors or omissions in labor or services as evidenced by insurance, legally authorized indemnity obligations, performance bonds, or warranties relating to the labor or services being provided.

(7)The subcontractor is customarily engaged in an independently established business of the same nature as that involved in the work performed.

(8)(A)Paragraph (2) shall not apply to a subcontractor providing construction trucking services for which a contractor’s license is not required by Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, provided that all of the following criteria are satisfied:

(i)The subcontractor is a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation.

(ii)For work performed after January 1, 2020, the subcontractor is registered with the Department of Industrial Relations as a public works contractor pursuant to Section 1725.5, regardless of whether the subcontract involves public work.

(iii)The subcontractor utilizes its own employees to perform the construction trucking services, unless the subcontractor is a sole proprietor who operates their own truck to perform the entire subcontract and holds a valid motor carrier permit issued by the Department of Motor Vehicles.

(iv)The subcontractor negotiates and contracts with, and is compensated directly by, the licensed contractor.

(B)For work performed after January 1, 2020, any business entity that provides construction trucking services to a licensed contractor utilizing more than one truck shall be deemed the employer for all drivers of those trucks.

(C)For purposes of this paragraph, “construction trucking services” mean hauling and trucking services provided in the construction industry pursuant to a contract with a licensed contractor utilizing vehicles that require a commercial driver’s license to operate or have a gross vehicle weight rating of 26,001 or more pounds.

(D)This paragraph shall only apply to work performed before January 1, 2022.

(E)Nothing in this paragraph prohibits an individual who owns their truck from working as an employee of a trucking company and utilizing that truck in the scope of that employment. An individual employee providing their own truck for use by an employer trucking company shall be reimbursed by the trucking company for the reasonable expense incurred for the use of the employee owned truck.

(g)Subdivision (a) and the holding in Dynamex do not apply to the relationship between a referral agency and a service provider, as defined below, under the following conditions:

(1)If a business entity formed as a sole proprietor, partnership, limited liability company, limited liability partnership, or corporation (“service provider”) provides services to clients through a referral agency, the determination whether the service provider is an employee of the referral agency shall be governed by Borello, if the referral agency demonstrates that all of the following criteria are satisfied:

(A)The service provider is free from the control and direction of the referral agency in connection with the performance of the work for the client, both as a matter of contract and in fact.

(B)If the work for the client is performed in a jurisdiction that requires the service provider to have a business license or business tax registration, the service provider has the required business license or business tax registration.

(C)If the work for the client requires the service provider to hold a state contractor’s license pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, the service provider has the required contractor’s license.

(D)The service provider delivers services to the client under service provider’s name, rather than under the name of the referral agency.

(E)The service provider provides its own tools and supplies to perform the services.

(F)The service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed for the client.

(G)The service provider maintains a clientele without any restrictions from the referral agency and the service provider is free to seek work elsewhere, including through a competing agency.

(H)The service provider sets its own hours and terms of work and is free to accept or reject clients and contracts.

(I)The service provider sets its own rates for services performed, without deduction by the referral agency.

(J)The service provider is not penalized in any form for rejecting clients or contracts. This subparagraph does not apply if the service provider accepts a client or contract and then fails to fulfill any of its contractual obligations.

(2)For purposes of this subdivision, the following definitions apply:

(A)“Animal services” means services related to daytime and nighttime pet care including pet boarding under Section 122380 of the Health and Safety Code.

(B)“Client” means a person or business that engages a service contractor through a referral agency.

(C)“Referral agency” is a business that connects clients with service providers that provide graphic design, photography, tutoring, event planning, minor home repair, moving, home cleaning, errands, furniture assembly, animal services, dog walking, dog grooming, web design, picture hanging, pool cleaning, or yard cleanup.

(D)“Referral agency contract” is the agency’s contract with clients and service contractors governing the use of its intermediary services described in subparagraph (C).

(E)“Service provider” means a person or business who agrees to the referral agency’s contract and uses the referral agency to connect with clients.

(F)“Tutor” means a person who develops and teaches their own curriculum. A “tutor” does not include a person who teaches a curriculum created by a public school or who contracts with a public school through a referral company for purposes of teaching students of a public school.

(3)This subdivision does not apply to an individual worker, as opposed to a business entity, who performs services for a client through a referral agency. The determination whether such an individual is an employee of a referral agency is governed by subdivision (a).

(h)Subdivision (a) and the holding in Dynamex do not apply to the relationship between a motor club holding a certificate of authority issued pursuant to Chapter 2 (commencing with Section 12160) of Part 5 of Division 2 of the Insurance Code and an individual performing services pursuant to a contract between the motor club and a third party to provide motor club services utilizing the employees and vehicles of the third party and, instead, the determination whether such an individual is an employee of the motor club shall be governed by Borello, if the motor club demonstrates that the third party is a separate and independent business from the motor club.

(i)(1)The addition of subdivision (a) to this section of the Labor Code by this act does not constitute a change in, but is declaratory of, existing law with regard to wage orders of the Industrial Welfare Commission and violations of the Labor Code relating to wage orders.

(2)Insofar as the application of subdivisions (b), (c), (d), (e), (f), (g), and (h) of this section would relieve an employer from liability, those subdivisions shall apply retroactively to existing claims and actions to the maximum extent permitted by law.

(3)Except as provided in paragraphs (1) and (2) of this subdivision, the provisions of this section of the Labor Code shall apply to work performed on or after January 1, 2020.

(j)In addition to any other remedies available, an action for injunctive relief to prevent the continued misclassification of employees as independent contractors may be prosecuted against the putative employer in a court of competent jurisdiction by the Attorney General or by a city attorney of a city having a population in excess of 750,000, or by a city attorney in a city and county or, with the consent of the district attorney, by a city prosecutor in a city having a full-time city prosecutor in the name of the people of the State of California upon their own complaint or upon the complaint of a board, officer, person, corporation, or association.

SEC. 3.

 Article 1.5 (commencing with Section 2775) is added to Chapter 2 of Division 3 of the Labor Code, to read:

Article  1.5. Worker Status: Employees

2775.

 (a) As used in this article:

(1) “Dynamex” means Dynamex Operations W. Inc. v. Superior Court (2018) 4 Cal.5th 903.

(2) “Borello” means the California Supreme Court’s decision in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.

(b) (1) For purposes of this code and the Unemployment Insurance Code, and for the purposes of wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

(2) Notwithstanding paragraph (1), any exceptions to the terms “employee,” “employer,” “employ,” or “independent contractor,” and any extensions of employer status or liability, that are expressly made by a provision of this code, the Unemployment Insurance Code, or in an applicable order of the Industrial Welfare Commission, including, but not limited to, the definition of “employee” in subdivision 2(E) of Wage Order No. 2, shall remain in effect for the purposes set forth therein.

(3) If a court of law rules that the three-part test in paragraph (1) cannot be applied to a particular context based on grounds other than an express exception to employment status as provided under paragraph (2), then the determination of employee or independent contractor status in that context shall instead be governed by Borello.

2776.

 Section 2775 and the holding in Dynamex do not apply to the following occupations as defined in the subdivisions below, and instead, the determination of employee or independent contractor status for individuals in those occupations shall be governed by Borello:

(a) A person or organization who is licensed by the Department of Insurance pursuant to Chapter 5 (commencing with Section 1621), Chapter 6 (commencing with Section 1760), or Chapter 8 (commencing with Section 1831) of Part 2 of Division 1 of the Insurance Code.

(b) A physician and surgeon, dentist, podiatrist, or veterinarian licensed by the State of California pursuant to Division 2 (commencing with Section 500) of the Business and Professions Code, performing professional or medical services provided to or by a health care entity, including an entity organized as a sole proprietorship, partnership, or professional corporation as defined in Section 13401 of the Corporations Code. Nothing in this section shall apply to the employment settings currently or potentially governed by collective bargaining agreements for the licensees identified in this subdivision.

(c) A psychologist, licensed professional clinical counselor, licensed clinical social worker, or marriage and family therapist licensed by the State of California pursuant to Division 2 (commencing with Section 500) of the Business and Professions Code, performing professional or medical services provided to or by a health care entity, including an entity organized as a sole proprietorship, partnership, or professional corporation as defined in Section 13401 of the Corporations Code. Nothing in this section shall apply to the employment settings currently or potentially governed by collective bargaining agreements for the licensees identified in this subdivision.

(d) An individual who holds an active license from the State of California and is practicing one of the following recognized professions: lawyer, architect, engineer, private investigator, or accountant.

(e) A securities broker-dealer or investment adviser or their agents and representatives that are either of the following:

(1) Registered with the Securities and Exchange Commission or the Financial Industry Regulatory Authority.

(2) Licensed by the State of California under Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing with Section 25230) of Division 1 of Part 3 of Title 4 of the Corporations Code.

(f) (1) A direct sales salesperson or manufactured housing salesperson as described in Section 650 of the Unemployment Insurance Code, so long as the conditions for exclusion from employment under that section are met.

(2) For a manufactured housing salesperson, all obligations created under Part 2 (commencing with Section 18000) of Division 13 of the Health and Safety Code, including, but not limited to, all regulations promulgated by the Department of Housing and Community Development relating to manufactured housing salespersons and all other obligations of manufactured housing salespersons to members of the public, shall apply regardless of whether the manufactured housing salesperson and the manufactured housing dealer to whom the salesperson is licensed have characterized their relationship as one of independent contractor or of employer and employee.

(g) A commercial fisherman working on an American vessel as defined in paragraph (1) below.

(1) For the purposes of this subdivision:

(A) “American vessel” has the same meaning as defined in Section 125.5 of the Unemployment Insurance Code.

(B) “Commercial fisherman” means a person who has a valid, unrevoked commercial fishing license issued pursuant to Article 3 (commencing with Section 7850) of Chapter 1 of Part 3 of Division 6 of the Fish and Game Code.

(C) “Working on an American vessel” means the taking or the attempt to take fish, shellfish, or other fishery resources of the state by any means, and includes each individual aboard an American vessel operated for fishing purposes who participates directly or indirectly in the taking of these raw fishery products, including maintaining the vessel or equipment used aboard the vessel. However, “working on an American vessel” does not apply to anyone aboard a licensed commercial fishing vessel as a visitor or guest who does not directly or indirectly participate in the taking.

(2) For the purposes of this subdivision, a commercial fisherman working on an American vessel is eligible for unemployment insurance benefits if they meet the definition of “employment” in Section 609 of the Unemployment Insurance Code and are otherwise eligible for those benefits pursuant to the provisions of the Unemployment Insurance Code.

(3) (A)   On or before March 1, 2021, and each March 1 thereafter, the Employment Development Department shall issue an annual report to the Legislature on the use of unemployment insurance in the commercial fishing industry. This report shall include, but not be limited to, all of the following:

(i) Reporting the number of commercial fishermen who apply for unemployment insurance benefits.

(ii) The number of commercial fishermen who have their claims disputed

(iii) The number of commercial fishermen who have their claims denied.

(iv) The number of commercial fishermen who receive unemployment insurance benefits.

(B) The report required by this subparagraph shall be submitted in compliance with Section 9795 of the Government Code.

(4) This subdivision shall become inoperative on January 1, 2023, unless extended by the Legislature.

(h) A newspaper distributor working under contract with a newspaper publisher, as defined in subparagraph (D), and a newspaper carrier working under contract either with a newspaper publisher or newspaper distributor.

(1) For purposes of this subdivision:

(A) “Carrier” means a person who effects physical delivery of the newspaper to the customer or reader.

(B) “Newspaper” means a newspaper of general circulation, as defined in Section 6000 of the Government Code, and any other publication circulated to the community in general as an extension of or substitute for that newspaper’s own publication, whether that publication be designated a “shoppers’ guide,” as a zoned edition, or otherwise.

(C) “Newspaper distributor” means a person or entity that contracts with a publisher to distribute newspapers to the community.

(D) “Publisher” means the natural or corporate person that manages the newspaper’s business operations, including circulation.

(2) This subdivision shall become inoperative on January 1, 2021, unless extended by the Legislature.

(i) (1) Amateur athletic officials supervising an amateur sporting contest held by an amateur sports organization.

(2) For the purposes of this subdivision:

(A) “Amateur athletic official” means an individual who supervises an amateur sporting contest, including, but not limited to, an umpire, referee, judge, scorekeeper, or timekeeper.

(B) “Amateur sporting contest” means any athletic competition in which the participants are not professional athletes, including interscholastic and intercollegiate events in which the participants are students and amateur contests in which the participants are children and adults.

(C) “Amateur sports organization” means a nonprofit entity or individual for whom or for which the amateur athletic official performs services.

(j) (1) A franchisee, as defined in Sections 31005 to 31006, inclusive, of the Franchise Investment Law (Division 5 (commencing with Section 31000) of Title 4 of the Corporations Code), if the following requirements are met:

(A) The franchisee has at least three employees, as defined in Section 2775, who are not lessees, owners, officers, directors, or members of the franchisee.

(B) The franchisee, or an entity owned or controlled by the franchisee, owns, or has a leasehold interest in, the physical premises on which the franchised business is operated.

(C) The franchised business location is open to the public.

(D) The franchisee primarily acquires or otherwise builds the franchisee’s customer base.

(E) Customers primarily make payments for goods or services directly to the franchisee.

(F) The franchisor of the franchisee grants the franchisee a license to use a federally registered trademark, service mark, or trade name owned by the franchisor in connection with the operation of the franchised business.

(2) This exemption applies only to the franchisee and does not apply to any employees, contractors or agents of the franchisee.

2777.

 (a) Section 2775 and the holding in Dynamex do not apply to a contract for “professional services” as defined below, and instead the determination of whether the individual is an employee or independent contractor shall be governed by Borello if the hiring entity demonstrates that all of the following factors are satisfied:

(1) The individual maintains a business location, which may include the individual’s residence, that is separate from the hiring entity. Nothing in this section prohibits an individual from choosing to perform services at the location of the hiring entity.

(2) If work is performed more than six months after the effective date of this section, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession.

(3) The individual has the ability to set or negotiate their own rates for the services performed.

(4) Outside of project completion dates and reasonable business hours, the individual has the ability to set the individual’s own hours.

(5) The individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work.

(6) The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.

(b) For purposes of this section:

(1) An “individual” includes an individual providing services through a sole proprietorship or other business entity.

(2) “Professional services” means services that meet any of the following:

(A) Marketing, provided that the contracted work is original and creative in character and the result of which depends primarily on the invention, imagination, or talent of the employee or work that is an essential part of or necessarily incident to any of the contracted work.

(B) Administrator of human resources, provided that the contracted work is predominantly intellectual and varied in character and is of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time.

(C) Travel agent services provided by either of the following:

(i) A person regulated by the Attorney General under Article 2.6 (commencing with Section 17550) of Chapter 1 of Part 3 of Division 7 of the Business and Professions Code.

(ii) An individual who is a seller of travel within the meaning of subdivision (a) of Section 17550.1 of the Business and Professions Code and who is exempt from the registration under subdivision (g) of Section 17550.20 of the Business and Professions Code.

(D) Graphic design.

(E) Grant writer.

(F) Fine artist.

(G) Services provided by an enrolled agent who is licensed by the United States Department of the Treasury to practice before the Internal Revenue Service pursuant to Part 10 of Subtitle A of Title 31 of the Code of Federal Regulations.

(H) Payment processing agent through an independent sales organization.

(I) (i) Services provided by a still photographer or photojournalist who does not license content submissions to the putative employer more than 35 times per year. This subparagraph is not applicable to an individual who works on motion pictures, which includes, but is not limited to, projects produced for theatrical, television, internet streaming for any device, commercial productions, broadcast news, music videos, and live shows, whether distributed live or recorded for later broadcast, regardless of the distribution platform.

(ii) For purposes of this subparagraph, a “submission” is one or more items or forms of content produced by a still photographer or photojournalist that meets all of the following:

(I) Pertains to a specific event or specific subject.

(II) Is provided for in a contract that defines the scope of the work.

(III) Is accepted by and licensed to the publication or stock photography company and published or posted.

(IV) Nothing in this article shall prevent a photographer or artist from displaying their work product for sale.

(J) (i)   Services provided by a freelance writer, editor, or newspaper cartoonist who does not provide content submissions to the putative employer more than 35 times per year. Items of content produced on a recurring basis related to a general topic shall be considered separate submissions for purposes of calculating the 35 times per year.

(ii) For purposes of this subparagraph, a “submission” is one or more items or forms of content by a freelance journalist that meets all of the following:

(I) Pertains to a specific event or topic.

(II) Is provided for in a contract that defines the scope of the work.

(III) Is accepted by the publication or company and published or posted for sale.

(K) Services provided by a licensed esthetician, licensed electrologist, licensed manicurist, licensed barber, or licensed cosmetologist provided that the individual:

(i) Sets their own rates, processes their own payments, and is paid directly by clients.

(ii) Sets their own hours of work and has sole discretion to decide the number of clients and which clients for whom they will provide services.

(iii) Has their own book of business and schedules their own appointments.

(iv) Maintains their own business license for the services offered to clients.

(v) If the individual is performing services at the location of the hiring entity, then the individual issues a Form 1099 to the salon or business owner from which they rent their business space.

(vi) This section shall become inoperative, with respect to licensed manicurists, on January 1, 2022.

(L) Security researchers participating in a vulnerability bounty, vulnerability disclosure, or similar program of an authorizing entity. As used in this subparagraph, “security researcher” means an individual who, through a manner authorized by an authorizing entity, identifies, analyzes, reports, tests or remediates security vulnerabilities in software, hardware, computer systems, and related technologies to a commercial platform that operates vulnerability bounty, vulnerability disclosure, or similar programs or the authorizing entity itself for financial compensation or professional consideration and “authorizing entity” means a corporation or other legal entity that owns or operates software, hardware, computer systems, and related technologies, and authorizes the activities of security researchers.

(M) Appraisers, as defined in Part 3 (commencing with Section 11300) of Division 4 of the Business and Professions Code.

(N) Certified shorthand reporters, as defined in Chapter 13 (commencing with Section 8000) of Division 3 of the Business and Professions Code, except as acting as an official court reporter. As used in this subparagraph, “official court reporter” does not include an official pro tempore reporter.

2778.

 Section 2775 and the holding in Dynamex do not apply to the following, which are subject to the Business and Professions Code:

(a) A real estate licensee licensed by the State of California pursuant to Division 4 (commencing with Section 10000) of the Business and Professions Code, for whom the determination of employee or independent contractor status shall be governed by subdivision (b) of Section 10032 of the Business and Professions Code. If that section is not applicable, then this determination shall be governed as follows:

(1) For purposes of unemployment insurance by Section 650 of the Unemployment Insurance Code.

(2) For purposes of workers’ compensation by Division 4 (commencing with Section 3200).

(3) For all other purposes in the Labor Code by Borello. The statutorily imposed duties of a responsible broker under Section 10015.1 of the Business and Professions Code are not factors to be considered under the Borello test.

(b) A repossession agency licensed pursuant to Section 7500.2 of the Business and Professions Code, for whom the determination of employee or independent contractor status shall be governed by Section 7500.2 of the Business and Professions Code, if the repossession agency is free from the control and direction of the hiring person or entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

2779.

 (a) Section 2775 and the holding in Dynamex do not apply to a bona fide business-to-business contracting relationship, as defined below, under the following conditions:

(1) If a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation (“business service provider”) contracts to provide services to another such business (“contracting business”), the determination of employee or independent contractor status of the business services provider shall be governed by Borello, if the contracting business demonstrates that all of the following criteria are satisfied:

(A) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.

(C) The contract with the business service provider is in writing.

(D) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.

(E) The business service provider maintains a business location that is separate from the business or work location of the contracting business.

(F) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.

(G) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.

(H) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.

(I) The business service provider provides its own tools, vehicles, and equipment to perform the services.

(J) The business service provider can negotiate its own rates.

(K) Consistent with the nature of the work, the business service provider can set its own hours and location of work.

(L) The business service provider is not performing the type of work for which a license from the Contractors’ State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

(2) This section does not apply to an individual worker, as opposed to a business entity, who performs labor or services for a contracting business.

(3) The determination of whether an individual working for a business service provider is an employee or independent contractor of the business service provider is governed by paragraph (1) of subdivision (b) of Section 2775.

(4) This section does not alter or supersede any existing rights under Section 2810.3

2780.

 Section 2775 and the holding in Dynamex do not apply to the relationship between a contractor and an individual performing work pursuant to a subcontract in the construction industry, and instead the determination of whether the individual is an employee of the contractor shall be governed by Section 2750.5 and by Borello, if the contractor demonstrates that all the following criteria are satisfied:

(a) The subcontract is in writing.

(b) The subcontractor is licensed by the Contractors’ State License Board and the work is within the scope of that license.

(c) If the subcontractor is domiciled in a jurisdiction that requires the subcontractor to have a business license or business tax registration, the subcontractor has the required business license or business tax registration.

(d) The subcontractor maintains a business location that is separate from the business or work location of the contractor.

(e) The subcontractor has the authority to hire and to fire other persons to provide or to assist in providing the services.

(f) The subcontractor assumes financial responsibility for errors or omissions in labor or services as evidenced by insurance, legally authorized indemnity obligations, performance bonds, or warranties relating to the labor or services being provided.

(g) The subcontractor is customarily engaged in an independently established business of the same nature as that involved in the work performed.

(h) (1) Subdivision (b) shall not apply to a subcontractor providing construction trucking services for which a contractor’s license is not required by Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, provided that all of the following criteria are satisfied:

(A) The subcontractor is a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation.

(B) For work performed after January 1, 2020, the subcontractor is registered with the Department of Industrial Relations as a public works contractor pursuant to Section 1725.5, regardless of whether the subcontract involves public work.

(C) The subcontractor utilizes its own employees to perform the construction trucking services, unless the subcontractor is a sole proprietor who operates their own truck to perform the entire subcontract and holds a valid motor carrier permit issued by the Department of Motor Vehicles.

(D) The subcontractor negotiates and contracts with, and is compensated directly by, the licensed contractor.

(2) For work performed after January 1, 2020, any business entity that provides construction trucking services to a licensed contractor utilizing more than one truck shall be deemed the employer for all drivers of those trucks.

(3) For purposes of this subdivision, “construction trucking services” mean hauling and trucking services provided in the construction industry pursuant to a contract with a licensed contractor utilizing vehicles that require a commercial driver’s license to operate or have a gross vehicle weight rating of 26,001 or more pounds.

(4) This subdivision shall only apply to work performed before January 1, 2022.

(5) Nothing in this subdivision prohibits an individual who owns their truck from working as an employee of a trucking company and utilizing that truck in the scope of that employment. An individual employee providing their own truck for use by an employer trucking company shall be reimbursed by the trucking company for the reasonable expense incurred for the use of the employee-owned truck.

2781.

 Section 2775 and the holding in Dynamex do not apply to the relationship between a referral agency and a service provider, as defined below, under the following conditions:

(a) If a business entity formed as a sole proprietor, partnership, limited liability company, limited liability partnership, or corporation (“service provider”) provides services to clients through a referral agency, the determination of whether the service provider is an employee of the referral agency shall be governed by Borello, if the referral agency demonstrates that all of the following criteria are satisfied:

(1) The service provider is free from the control and direction of the referral agency in connection with the performance of the work for the client, both as a matter of contract and in fact.

(2) If the work for the client is performed in a jurisdiction that requires the service provider to have a business license or business tax registration, the service provider has the required business license or business tax registration.

(3) If the work for the client requires the service provider to hold a state contractor’s license pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, the service provider has the required contractor’s license.

(4) The service provider delivers services to the client under the service provider’s name, rather than under the name of the referral agency.

(5) The service provider provides its own tools and supplies to perform the services.

(6) The service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed for the client.

(7) The service provider maintains a clientele without any restrictions from the referral agency and the service provider is free to seek work elsewhere, including through a competing agency.

(8) The service provider sets its own hours and terms of work and is free to accept or reject clients and contracts.

(9) The service provider sets its own rates for services performed, without deduction by the referral agency.

(10) The service provider is not penalized in any form for rejecting clients or contracts. This paragraph does not apply if the service provider accepts a client or contract and then fails to fulfill any of its contractual obligations.

(b) For purposes of this section, the following definitions apply:

(1) “Animal services” means services related to daytime and nighttime pet care including pet boarding under Section 122380 of the Health and Safety Code.

(2) “Client” means a person or business that engages a service contractor through a referral agency.

(3) “Referral agency” is a business that connects clients with service providers that provide graphic design, photography, tutoring, event planning, certified interpretation or translation services, minor home repair, moving, home cleaning, errands, furniture assembly, animal services, dog walking, dog grooming, web design, picture hanging, pool cleaning, or yard cleanup.

(4) “Referral agency contract” is the agency’s contract with clients and service contractors governing the use of its intermediary services described in paragraph (3).

(5) “Service provider” means a person or business who agrees to the referral agency’s contract and uses the referral agency to connect with clients.

(6) “Tutor” means a person who develops and teaches their own curriculum, teaches curriculum that is proprietarily and privately developed, or provides private instruction or supplemental academic enrichment services by using their own teaching methodology or techniques. A “tutor” does not include a person who teaches a curriculum created by a public school or who contracts with a public school through a referral company for purposes of teaching students of a public school.

(7) “Certified interpretation or translation services” means a person who has proof of good standing, certification, or a credential number from one of the following organizations: the Judicial Council of California, Federal Courts, United States Department of State, American Translators Association, International Association of Conference Interpreters, Certification Commission for Health Care Interpreters, National Board of Certification for Medical Interpreters, National Interpreter Certification, or Center for the Assessment of Sign Language Interpretation.

(c) This section does not apply to an individual worker, as opposed to a business entity, who performs services for a client through a referral agency. The determination of whether such an individual is an employee of a referral agency is governed by Section 2775.

2782.

 Section 2775 and the holding in Dynamex do not apply to the relationship between a motor club holding a certificate of authority issued pursuant to Chapter 2 (commencing with Section 12160) of Part 5 of Division 2 of the Insurance Code and an individual performing services pursuant to a contract between the motor club and a third party to provide motor club services utilizing the employees and vehicles of the third party and, instead, the determination of whether such an individual is an employee of the motor club shall be governed by Borello, if the motor club demonstrates that the third party is a separate and independent business from the motor club.

2790.

 (a) Section 2775 does not constitute a change in, but is declaratory of, existing law with regard to wage orders of the Industrial Welfare Commission and violations of this code relating to wage orders.

(b) Insofar as the application of Sections 2776 to Section 2782, inclusive, would relieve an employer from liability, those sections shall apply retroactively to existing claims and actions to the maximum extent permitted by law.

(c) Except as provided in subdivisions (a) and (b), this article shall apply to work performed on or after January 1, 2020.

2791.

 In addition to any other remedies available, an action for injunctive relief to prevent the continued misclassification of employees as independent contractors may be prosecuted against the putative employer in a court of competent jurisdiction by the Attorney General or by a city attorney of a city having a population in excess of 750,000, or by a city attorney in a city and county or, with the consent of the district attorney, by a city prosecutor in a city having a full-time city prosecutor in the name of the people of the State of California upon their own complaint or upon the complaint of a board, officer, person, corporation, or association.

SEC. 4.

 Section 650 of the Unemployment Insurance Code is amended to read:

650.

 “Employment” does not include services performed as a real estate, mineral, oil and gas, or cemetery broker or as a real estate, cemetery cemetery, manufactured housing, or direct sales salesperson, or a yacht broker or salesman, by an individual if all of the following conditions are met:

(a) The individual is licensed under the provisions of Chapter 19 (commencing with Section 9600) of Division 3 of, or Part 1 (commencing with Section 10000) of Division 4 of, the Business and Professions Code, Article 2 (commencing with Section 700) of Chapter 5 of Division 3 of the Harbors and Navigation Code, Chapter 7 (commencing with Section 18045) of Part 2 of Division 13 of the Health and Safety Code, or is engaged in the trade or business of primarily inperson demonstration and sales presentation of consumer of products, including services or other intangibles, in the home or business of the buyer or sales to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis, for resale by the buyer or any other person in the home or otherwise than from a retail or wholesale establishment. For the purposes of this section, a bus, van, or truck from which the individual seller sells products, a majority of which consists of tools and equipment used for the repair and maintenance of motorized vehicles, to its customers does not qualify as a retail or wholesale establishment.

(b) Substantially all of the remuneration (whether or not paid in cash) for the products sold or services performed by that individual is directly related to sales or other output (including the performance of services) rather than to the number of hours worked by that individual.

(c) The services performed by the individual are performed pursuant to a written contract between that individual and the person for whom the services are performed and the contract provides that the individual will not be treated as an employee with respect to those sales or services for state tax purposes.