Subcontracting

[budwad]

I've been looking more and more into this.

In California (Assembly Bill 5) states that

(1) the work she performs is free from control of the hiring entity, (2) the work is outside the usual course of the hiring entity’s business, and (3) the worker is customarily engaged in an independent trade.

(2) the work is outside the usual course of the hiring entity’s business is impossible for us to avoid. All of the contractors are performing office cleaning services and we are an office cleaning company.

More importantly, Even established cleaning businesses can be soleproprietors or Single Member LLC's who chose to perform the labor themselves. And just because they are working sololey does not make them our employees because:

We dont Control their work, We dont Make them wear our logos/represent our company, We don't provide equipment/insurance/supplies, etc.

We are simply a company that acts as a Sales/Marketing/Billing company for other Janitorial companies.

Does this AB5 law mean that we have to exclude any sole-proprietor or single member corporation from transacting business with us?

I think this law was not thought all the way through. It definately will stop the exploitation on IC's (for those are exploiting them), but it will also negatively impact those who are operating LAWFULLY.

The Assembly Bill is an attempt to codify what the CA Supreme Court decided in the DYNAMEX case. It is the ABC test that most states use to decide if someone is an employee or an IC for the purposes of the wage and compensation laws. I already told you this in previous posts.

Your problem is that while you think you are a cleaning (janitorial) service, what you are if you want to hire IC's to do the work, is a referral service where you contract with IC's that are independent contractors. I don't want to venture a guess how the courts would look at this. But if your service is to clean offices, then any IC you hire is doing the work that you customarily do. Right? That fails the B part of the ABC test and they would be employees.

If you are a referral business that contracts with IC's then you get a commission or fee for placing them in a contractual agreement for service with your clients. And likely from both sides if your smart.

The common law about IC's is evolving quickly. You should not rely on a message board for advice. You should consult a labor attorney for actionable advice.

[Csiscool]

A bill is not a law. A bill can eventually become a law if its voted on and passed, but at this point a bill is a proposed law, and one that might either never be passed or be substantially changed before it passes.

I was under the impression the bill was to become law and take effect on January 1st, 2020

[budwad]

It is law now as it was signed by the Governor. It takes effect Jan. 1,2020 as you thought.

[Csiscool]

The Assembly Bill is an attempt to codify what the CA Supreme Court decided in the DYNAMEX case. It is the ABC test that most states use to decide if someone is an employee or an IC for the purposes of the wage and compensation laws. I already told you this in previous posts.

Your problem is that while you think you are a cleaning (janitorial) service, what you are if you want to hire IC's to do the work, is a referral service where you contract with IC's that are independent contractors. I don't want to venture a guess how the courts would look at this. But if your service is to clean offices, then any IC you hire is doing the work that you customarily do. Right? That fails the B part of the ABC test and they would be employees.

If you are a referral business that contracts with IC's then you get a commission or fee for placing them in a contractual agreement for service with your clients. And likely from both sides if your smart.

The common law about IC's is evolving quickly. You should not rely on a message board for advice. You should consult a labor attorney for actionable advice.

I don't really look at myself as a Janitorial service. We are a Sales/Marketing service for local smaller cleaning businesses. I did more digging and was reading into the AB5. They have exmeptions for business-to-business transactions and referral agencies.

However it seems that my business would not be exempt as for business-to-business contracting because this is one of the rules:

(B) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.

And it seems like we would not be exempt as a referral agency because:

(D) The service provider delivers services to the client under service provider’s name, rather than under the name of the referral agency. (Our company hold the contracts, but they don't represent us. They don't wear our logo or anything, but we do collect monies).

It seems that we will be forced to most likely operate as a referal agency. I will be speaking with Lawyers about this, but was just seeking your guy's opinions.