12/16/2019
Governor Newsom signed Assembly Bill 5 (AB5) into law on September 18, 2019. It will become effective on January 1, 2020.
AB5 was introduced in the 2019 legislative session to address the California Supreme Court Decision Dynamex. The Dynamex decision addressed who is an employee and who qualifies as an independent contractor. AB5 codified the Supreme Court Decision. This law affects everyone who thinks they are independent contractors, from truckers, to Lyft and Uber drivers, to massage therapists. The bill talks about what test needs to be met to be determined to be an independent contractor.
Some professions were able to get an exemption from the requirements of the bill. Massage therapists were not exempted or specified in the bill. As such, the following language applies to massage therapists.
To be classified as an independent contractor, the following statements all have to be true:
"(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."
As we discussed in our September 28, 2018, communication to our California members, we expect section (B) will be the biggest issue because many massage therapists work at the same location as other massage therapists but are currently classified as independent contractors. Last year, when the California Supreme Court was ruling on the Dynamexcase, they discussed this section and came up with the following examples:
"When a retail store hires an outside plumber to repair a leak in a bathroom on its premises, or hires an outside electrician to install a new electrical line, the services of the plumber or electrician are not part of the store's usual course of business and the store would not reasonably be seen as having hired the plumber or electrician as an employee.
On the other hand, when a clothing manufacturing company hires work-at-home seamstresses to make dresses from cloth and patterns supplied by the company that will then be sold by the company, or when a bakery hires cake decorators to work on a regular basis on its custom-designed cakes, the workers are part of the hiring entity's usual business operation and the hiring business can reasonably be viewed as having hired them as employees."
The bottom line is that in order to be an independent contractor, one has to:
- Have total control of your work (hours/dress/book of business/payment)
- Not be performing the same work as the hiring entity's primary business
- And be doing what you normally do in your own course of business
If you are working in a spa that offers massage therapy among other services, you will most likely be determined to be an employee. If anyone has any control of your work, such as required work attire, hours expected at work, and control of your book of business, and they pay you, you will likely be classified as an employee. If you are a sole practitioner that does mobile massage and no one controls what you do, you will most likely be classified as an independent contractor. If you rent a room at a coffee shop, an athletic club, or a nursing home once a week, you will most likely be determined to be an independent contractor. There are many grey areas that massage therapists may fall into due to the nature of their work. And it will most likely be a case-by-case consideration. There will definitely be a lot of litigation to figure out how this looks in the years ahead.
Although we do our best to be helpful in assisting our members in understanding this bill, we are not attorneys, and our interpretation of the bill above is just that—our interpretation. If you have concerns or questions regarding your employment situation, please contact an attorney and get legal advice.