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What AB5 and California Illustrate About the Future of Independent Contractors

Posted on December 1st, 2020 Read time: 1 minutes

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When California’s Assembly Bill 5 (AB5) went into effect at the beginning of 2020, its intent was clear: draw a clear distinction between what it means to be an independent contractor and what it means to be a traditional employee. Quite a few companies have struggled with AB5 compliance, leading to unforeseen legal troubles and even a successful challenge to the spirit of the measure via Prop 22.

These classification struggles typically stem from a simple lack of understanding, which is why it’s so essential to build a strong HR team. Most executives don’t have a thorough understanding of HR and labor laws, leading to incorrect assumptions about classification rules. One of the biggest misunderstandings is employers incorrectly believing that classification is ultimately up to them as a matter of business — not a matter of law.

Further compounding this confusion is the fact that these laws are still evolving and can vary from country to country and state to state, causing everyone to feel like they’re chasing a moving target. The landscape might still be evolving, but a concentrated effort can help bring everything into focus.

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Antonio Barraza is a business development representative and contingent workforce expert at Innovative Employee Solutions (IES), a leading nationwide employer of record that specializes in payrolling and contractor management services for today’s contingent workforce. Founded in 1974, IES has grown into one of San Diego’s largest women-owned businesses and has been named one of the city’s “Best Places to Work” for 10 years in a row.

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