Business-Favorable Clarifications to Exclusions in AB 5 Independent Contractor Law

Business-Favorable Clarifications to Exclusions in AB 5 Independent Contractor Law

AB 5, which adopted the expansive A-B-C test that limited independent contractor classification, came under fire for a complicated difficult-to-administer patchwork of occupational exclusions. Watching AB 5 during its inaugural year in action, the Legislature enacted a series of clarifications and expansions to occupational exemptions under the law. An exemption generally means the position, if fitting under the exemption, is then measured under the looser multi-factor test for independent contractor status instead of the stricter A-B-C test. Key changes this year involved the existing business-to-business (BTB), new music industry, existing referral agency, and existing professional services exemptions. Most relevant to the entertainment industry, the BTB exemption clarified that a residence can serve as a qualifying place of business and that a contractor business having only a single client is not disqualified as long as the possibility for multiple clients exists. Also, the new music industry exemption excluded many occupations in the end-to-end music content creation, distribution, and promotion life cycle.