How will AB5 ABC Test affect your Photo Booth Business?
First off, there are other states that adopted the ABC Test before California. Majority of the ABC Test for each state is similar in many ways; however, our photo booth business is in California so we’re focused on California’s ABC Test. In addition, this is our opinion on how we interpreted AB5 ABC Test.
Will California Assembly Bill 5 (AB5) affect your current photo booth business in California? Now is the time to start thinking about it because California State Agencies began enforcing AB5 on January 1, 2020.
AB5 prevents business owners (employers) from classifying the normal joe who gets a “side” job as an independent contractor. In other words, classifying photo booth attendants as independent contractors is over because of the ABC Test.
History of AB5 ABC Test & Common Law Test
The ABC Test was first adopted by the Massachusetts Legislature on July 19, 2004. For California, AB5 came to fruition from the landmark case between Dynamex Operations West, Inc. v. Superior Court. In that case, the Supreme Court held most of the workers who were classified as independent contractors to be employees. Dynamex had the burden of proof to prove that the individuals are independent contractors. They did not provide enough proof that they were independent contractors using the Borello Test a.k.a. common law test.
The common law test identifies factors of direction and control over the means and manner of performing contracted work. Both federal and state agencies used this test prior to January 1, 2020 to determine a workers status. Now for California, it will be the ABC Test on most occasions.
Now that we know some background about the test being used prior; AB5 ratifies the ABC Test to be used instead of the common law test in most occasions. Similar to the common law test, the employer/hiring entity has the burden of proof to prove that the individual meets the three criteria’s of the ABC Test.
ABC Test Criteria
(A) If free from the control and direction of the employer. In performing work, both practically and in the contractual agreement between parties.
(B) Performs work that is outside the usual course of the employer’s business;
(C) Is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the employer.
Remember that all three criteria’s of the ABC Test have to be met for the photo booth worker to be an independent contractor. There are some exemptions but for the photo booth industry, we do not see where we would fall in any of the exemptions.
ABC Test for Photo Booth Businesses
We know it’s a lot of legal jargon for us photo booth owners. Let us simplify each test on how we interpreted each test specifically for the photo booth industry.
Test A; Just think of this test similar to the common law test. Proving whether or not the employer directs and controls the photo booth workers services in fact and in contract. As an example, if we train the worker, provide the worker with all the tools and materials, etc.
Test B; Whether or not the services provided by the photo booth worker is an integral part of the employer’s business. For photo booth attendants, we all know their services are an integral part of the business. Typically even when we white label; The services that the white labeling company is providing is an integral part of the business since it is a direct correlation of the hiring entities business services. An example that is not an integral part of the business is a bakery hiring a photo booth company for their grand opening.
Lastly, Test C is whether or not the photo booth worker has a bonafide photo booth business.
AB5 ABC Test Resources for Photo Booth Businesses
We suggest talking to a CPA or Employment Attorney regarding the worker classification, AB5 or the ABC Test. Additionally, talk to the state agencies that are enforcing AB5 and using the ABC Test for classification. There are two California state agencies that come to mind; The Employment Development Department (EDD) and the Department of Industrial Relations Division of Labor Standards Enforcement (DIR-DLSE). They also have great resources such as free seminars, EDD website regarding AB5 ABC Test, DIR website regarding AB5 ABC Test, and much more.