The NEW ABCs of 1099 Contractor Classification (AB-5)

contractors files

In January 2020 California AB-5 will go into effect and many workers previously classified as contractors will be required to reclassify as W-2 wage earning employees.  The CA EDD has always had criteria by which employers can determine whether a worker is classified correctly as a 1099 but those criteria were more numerous and open to interpretation.  Now, starting in January 2020, there are only 3 criteria and a 1099 contractor must meet all 3 parameters or else they must be classified as W-2 wage earning employees. For those companies who are exempt (doctors, dentists, lawyers, architects, insurance agents, accountants, engineers, financial advisers, real estate agents, and hairstylists to name a few) from the new AB-5 criteria, the 13 point Borello test is still the standard by which contractor status will be determined.

The 13 point Borello test and new “ABC’s” test are not dissimilar, see infographic below to see how the Borello criteria relate to the new ABCs of worker classification.

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If you have questions a round the new AB-5 law and how your workers will be viewed by CA EDD, reach out to the team at Milikowsky Tax Law.  We are experts in California Employment Law and can guide you through the process of reassessing your company’s workers and their classification.