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California AB 5 and what it means to you

You have probably heard about the new California rule, known as "AB 5", that was added to the California labor code effective January 1, 2020.

Based on this ruling, paid laborers will be considered employees “unless the hiring entity demonstrates that all of the following are satisfied:”

“(A) 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 for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity's business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

This ruling puts the obligation on the business to disprove the assumption that all laborers are employees who are subject to payroll taxes, unemployment insurance, and workers compensation.  The consequences of improper categorization can be costly when you consider the cost of back taxes plus penalties and interest.

There are some exceptions to this rule, but none of the exceptions appear to be directly applicable to  the wine industry.

More Information 

  • Additional details about this new law, including a Frequently Asked Questions document, are available from the California Labor and Workforce agency website.
  • You might also want to read one law firm's perspective on this topic here

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