AB 1561 Makes Important Changes to California’s ABC Test for Independent Contractors

On September 30, 2021, Governor Gavin Newsom signed into law Assembly Bill 1561 (Labor and Employment Committee), which amends four provisions of AB 2257 (Gonzalez, 2020 Session), which is California’s law on the proper classification of independent contractors and the application of the “ABC Test” pursuant to the state Supreme Court’s decision in the Dynamex case.

Section One of the bill amends Labor Code Section 2778 dealing with the “professional services” exemption from the ABC Test/Dynamic test. It extends the sunset date on the provisions related to licensed manicurists from January 1, 2022 to January 1, 2025.

Section Two of the bill amends Labor Code Section 2781 dealing with the relationship between a contractor and an individual performing work as a subcontractor in the construction industry. It extends the sunset date on this section to work performed before January 1, 2025, rather than the current date of January 1, 2022.

Section Three of the bill amends Labor Code Section 2782 dealing with the relationship between a data aggregator and an individual providing feedback to the data aggregator. First, it changes “an individual providing feedback to the data aggregator” to “a research subject” throughout this code section. Second, it eliminates the requirement that “any consideration paid for the feedback provided, if prorates to an hourly basis, is an amount equivalent to or greater than the minimum wage.” Third, it defines “research subject” as “any person who willingly engages with a data aggregator in order to provide individualized feedback on user interface, products, services, people, concepts, ideas, offerings, or experiences, and does not engage solely for the purposes of completing individual tasks, except as the tasks relate to providing such feedback.”

Section Four of the bill amends Labor Code Section 2783 dealing with the occupations exemption from the ABC Test/Dynamex test. It extends the Department of Insurance licensee exemption to include persons providing claims adjusting and third-party administration work for the insurance and financial service industries. It defines “third-party administrator” by reference to the definition contained in California Code of Regulations Title 8, Section 10112.1(cc).