How do I know if I have to classify contractors as employees on my workers' comp policy according to California's AB5?

You can use a 3-pronged test (known as the “ABC test”) to determine if your worker is considered an independent contractor or an employee under the new rules.

If they meet all three of these criteria, they are considered independent contractors and may be excluded from your policy:

1. The worker is free to perform services without the control or direction of your company or business.
2. The worker is performing work tasks that are outside the usual course of your company’s activities.
3. The workers is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

Example: Acme Fitness Center hires Alex, a licensed plumber, to install fixtures in their remodeled studio’s bathroom. 

Conclusion: Alex may be excluded from the Acme’s workers’ comp policy because:

1. Alex is not operating under Acme’s control or direction.
2. The work performed by Alex is outside of the normal course of Acme’s business (i.e., plumbing vs. fitness).
3. The work Alex did is consistent with the normal duties a plumber performs for all customers, not just Acme.

Example:  Acme Fitness Center hires Sam to teach a yoga class every Tuesday and Thursday evening.

Conclusion: Sam must be included on Acme’s workers’ comp policy because:

1. Acme is directing the scheduling and content of Sam’s work.
2. Sam’s work is consistent with the normal course of Acme’s business (i.e., fitness). 
3. Even though Sam may be providing the same service for other customers, because the work does not meet all three of the ABC criteria, Sam must be included on Acme’s policy.

You can review the bill and the criteria for whether or not your workers qualify as employees or as independent contractors under the new rules by visiting the California Labor and Workforce Development Agency website.