Barrett Business Services, Inc. · NASDAQ:BBSI
Barrett Business Services — AB5 Webinar (July 2022)
32 slides from Barrett Business Services's conference presentation, Jul 27, 2022
Slide 1: The ABCs of AB 5
The ABCs of AB 5 Jim Fessenden jfessenden@fisherphillips.com Date: July 27, 2022 fisherphillips.com
Slide 2: Some Background
Some Background fisherphillips.com
Slide 3: Some Background
Some Background Last 100 years: various tests based on “control” fisherphillips.com
Slide 4: The Borello Control Test
The Borello Control Test • Main focus on “control.” Until 2018, independent contractor analysis focused on whether the hiring entity had control over the manner and means of accomplishing the result desired, or just the results. • This was the Borello Control Test. fisherphillips.com
Slide 5: The Borello Control Test
The Borello Control Test After control, there were 13 other factors, including: • Whether the work was integral to the hiring entity; • Who supplied the equipment; • Whether the worker holds themselves out as being in a distinct occupation or business; • Whether the work required special skill; • Le
Slide 6: Historically:
Historically: This test was really just a messy assessment of “factors.” no direct oversight some special skill supplies own equipment no prohibition on working for competitors + good vendor agreement Independent Contractor! fisherphillips.com
Slide 7: Some Background
Some Background Last 100 years: various tests based on “control” fisherphillips.com
Slide 8: Some Background
Some Background Last 100 years: various tests based on “control” 2018 to present: the “ABC” test fisherphillips.com
Slide 9: Dynamex and the ABC Test
Dynamex and the ABC Test The ABC test started in 2018 when the Supreme Court issued its Dynamex decision. The California Legislature then codified Dynamex with its own decision. The law was effective January 1, 2020 but is retroactive. fisherphillips.com
Slide 10: The "ABC Test"
The “ABC Test” A. Control. The person is free from the control and direction of the hiring entity in connection with the performance of the work both under the contract and in actuality. B. Usual course of business. The person performs work that is outside the usual course of the hiring entity’s bus
Slide 11: The "ABC Test"
The “ABC Test” A. Control. The person is free from the control and direction of the hiring entity in connection with the performance of the work both under the contract and in actuality. B. Usual course of business. The person performs work that is outside the usual course of the hiring entity’s bus
Slide 12: The Impact On Trucking
The Impact On Trucking fisherphillips.com
Slide 13: The Impact of AB 5 on Trucking
The Impact of AB 5 on Trucking November 2019: Shortly after the original version of AB 5 passes, California Trucking Association and two contractors sue to block enforcement of AB 5 as to motor carriers based on federal law preemption. January 2020: The trial court agrees! The court issues a prelimi
Slide 14: The Impact of AB 5 on Trucking
The Impact of AB 5 on Trucking April 2021: The Ninth Circuit Court of Appeals reverses the injunction. August 2021: CTA asks the U.S. Supreme Court to weigh in. June 30, 2022: The Supreme Court declines to review, which means the Ninth Circuit’s order (which permits AB 5 in the trucking industry) st
Slide 15: "What if our contractors have an LLC?"
The “ABC Test” “What if our contractors have an LLC?” fisherphillips.com
Slide 16: The "ABC Test"
The “ABC Test” An LLC is helpful and a good first step, but there are two reasons it will not - by itself - save you. fisherphillips.com
Slide 17: The "ABC Test": Labor Code defines "Person" to include an LLC
The “ABC Test” First, the Labor Code defines “Person” to include an LLC: Section 18: “Person” means any person, association, organization, partnership, business trust, limited liability company, or corporation. fisherphillips.com
Slide 18: The "ABC Test"
The “ABC Test” A. Control. The person is free from the control and direction of the hiring entity in connection with the performance of the work both under the contract and in actuality. B. Usual course of business. The person performs work that is outside the usual course of the hiring entity’s bus
Slide 19: The "ABC Test": additional exemption requirements
The “ABC Test” Second, while having an LLC is helpful, there are several additional requirements to meet an “exemption” from AB 5 that will apply in most cases. We’ll discuss those next. fisherphillips.com
Slide 20: Statutory Exemptions
Statutory Exemptions fisherphillips.com
Slide 21: Statutory Exemptions
Statutory Exemptions Reminder: There are dozens of exemptions. But an exemption only means that the Borello Control test applies instead of the ABC test. Even if one of these exemptions is satisfied, misclassification can still be a risk. fisherphillips.com
Slide 22: Statutory Exemptions
Statutory Exemptions Most common: • Business-to-business exemption • Referral Agency • Professional Services • Certain single engagement events • Recording artists • Construction subcontractors fisherphillips.com
Slide 23: Business-to-Business Exemption (Truncated)
Business-to-Business Exemption (Truncated) (1) The business service provider is free from the control and direction of the contracting business entity. (2) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business un
Slide 24: Business-to-Business Exemption (Truncated)
Business-to-Business Exemption (Truncated) (7) The business service provider can contract with other businesses to provide the same or similar services. (8) The business service provider advertises and holds itself out to the public. (9) Consistent with the nature of the work, the business service p
Slide 25: Vendors
Vendors fisherphillips.com
Slide 26: Relying on Vendors
Relying on Vendors Labor Code section 2810.3 also governs your vendors. fisherphillips.com
Slide 27: Relying on Vendors
Relying on Vendors Labor Code section 2810.3 also governs your vendors. • A “Client Employer” with 25+ employees, • Who hires a vendor that perform work in the Client Employer’s “usual course of business,” • Is equally liable for unpaid wages and workers’ compensation coverage for the vendor’s emplo
Slide 28: Relying on Vendors
Relying on Vendors • Know your “usual course of business” • Know your universe: run a 1099 report. • Categorize into three buckets: • Individuals • One-person LLCs/Companies • Small/captive vendors fisherphillips.com
Slide 29: Relying on Vendors
Relying on Vendors For each individual 1099, we need to consider requiring the 1099 to form an entity (LLC/Inc). You may also wish to re-engage the entity with an indemnity clause as to the employees. Why? Include arbitration agreement. fisherphillips.com
Slide 30: Relying on Vendors
Relying on Vendors • Consider using a staffing firm or a PEO. • Do NOT enter contracts with employees of vendors, but there are options → vendor can use arbitration. • If in doubt, secure proof of insurance coverage. • Above all else, understand the risks and limitations. fisherphillips.com
Slide 31: How We Can Help
How We Can Help BBSI (NASDAQ: BBSI) is one of the largest Professional Employer Organizations (PEO) in the US and a leading provider of business management solutions nationwide. Since 1951, our local professionals in 60 offices help businesses of all sizes grow revenue, increase efficiency, mitigate
Slide 32: Questions?
Questions? Thank you for joining us today! Please let us know how we can be of further assistance with your continued business success. (424)295-7997 or michael.burkitt@bbsi.com Jim Fessenden Fisher & Phillips LLP jfessenden@fisherphillips.com 3 fisherphillips.com