California Assembly Bill 5 (also known as CA AB 5) was signed into law in September 2019, implementing a new test all employers must use to determine if a worker is an employee or an independent contractor under the California Labor Code. The law may impact who you cover under your workers’ compensation policy.
While the bill is effective January 1, 2020, the part that affects workers’ comp coverage goes into effect July 1, 2020.
You Need to Know:
- The new legislation is not based on policy effective date. As of July 1, 2020, as an employer, you’ll be subject to the new test. This means that a worker could be classified as an independent contractor before July 1, 2020 and as an employee after July 1, 2020.
- If you’ve employed an independent contractor that can supply you with a certificate of workers’ compensation insurance that is effective during your policy period, he/she would not be considered part of your employee roster. You would not report payroll for him/her.
- In order to avoid an unexpected change in exposures at time of audit, you must include payroll for all employees defined by the statute as of July 1, 2020.
- The statute applies to businesses headquartered in California AND businesses headquartered elsewhere with employees working in California.