Can a psychologist be an independent contractor in California? Am I exempt from the CA AB5 law? These are common questions among service providers who want to hold a practice in the state but are still baffled by the specifics of the new AB5 law. With the enactment of AB5 law, otherwise known as the “gig economy law,” knowing how your worker status would be is important to avoid legal issues.
Because it’s new, several employers, employees, and independent contractors still do not have a clear-cut understanding of it. However, the California Psychological Association (CPA) knew that psychologists will take the hit the most because of the profession’s diversity and the law’s ambiguity in terms of how business owners will interpret and apply the guidelines.
What is the New AB5 Law?
The AB5 (Assembly Bill 5) law took effect on January 1, 2020, three months after Governor Gavin Newsome signed it on September 18, 2019. This new law, which applies to all California workers, allows employers to determine whether their recruits fall under independent contractor (IC) or employee categories with the exception of several professions. Several tests help determine whether you are an employee or an independent contractor, such as the ABC test and Borello test.
What professions are exempted from AB5?
The Borello and ABC tests are mandatory tests for employers so they can classify ICs and full-time employees. First, the employers must take the Borello test or the “right to control” test. Here, the level of the hirer’s control over the processes used by a worker is assessed.
The ABC test qualifies a worker as an IC or full-time employee through a set of guidelines including:
- Under the contract, the worker’s freedom from control and direction of the hirer in terms of work performance.
- The worker’s services are also offered to other businesses outside of the usual course of the hirer’s business.
- The work performed for the hirer is in the same nature as independently established trade, occupation, or business
With this test, an employer cannot classify a recruit as an independent contractor while performing duties similar to his or her employees.
What is the Difference Between a Contractor and Employee?
A contractor and an employee may render the same type of work or service under different conditions. There are legal differences in terms of hours worked, wages paid, and government-mandated benefits and compensations.
For one thing, regular full-time or part-time employees pay income tax (W-4 category), social security, and Medicare. They are also covered by labor laws. Employees also report to their employers and earn an hourly rate or monthly salary.
On the contrary, independent contractors are not covered by labor laws and shoulder their own W-9 taxes. Depending on their contract with their clients, they may be paid hourly, daily, or weekly wages, although they are not on the company’s payroll.
Who is exempt from CA AB5?
There are professions that are exempt from the AB5 law in California. Some are medical and some are creative. Among them include:
- Doctors
- Dentists
- Veterinarians
- Insurance agents
- Lawyers
- Real estate agents
- Hairstylists
Business-to-business contractors are also exempt provided they meet the 12 specific requirements and referral agencies.
Can a Psychologist Be an Independent Contractor in California?
The AB5 is designed to regulate companies such as Lyft, Uber, and DoorDash, which hire a huge number of workers. However, it would have prevented psychologists from offering their services to hospitals, non-profit organizations, and other companies. The ambiguity of the law and the diversity of the profession service-wise are major factors that prompted the CPA to lobby state legislators with a variety of work settings.
Amanda Levy, director of governmental affairs at CPA (California Psychological Association), was concerned that “…without an exemption, psychologists would be unable to work as independent contractors, diminishing their ability to earn a living and cutting off access to mental health services in the state.” Food delivery workers and Uber and Lyft drivers, as well as their hirers, may have been left unsatisfied with the AB5, but psychologists can relax. The CPA won the exemption appeal, which allows psychologists to continue providing mental health services as independent contractors in the state of California. This also gives them more control over their work hours, who their clients will be, and the type of work they want to do. The exemption is beneficial as it allows for maximum flexibility for psychologists and the profession to thrive in California. According to Levy, it also increases access to vital mental health services.
If you are a psychologist wondering if you can be an independent contractor in California, the answer is yes. Psychologists looking to practice in the state can successfully render their services as independent contractors or employees.
Begin Your Practice as a Psychologist with Full Knowledge of the AB5 Law
While several questions do not have concrete answers yet, the question “Can a psychologist be an independent contractor in California” should no longer bother you. However, it is undeniable that without proper knowledge of the AB5 law, you may still hit a bump in the process of establishing your practice.
Planning is the key. No doubt the gig economy law can impact your practice. How this law will be interpreted and applied concerning your case is still unclear. Getting the right legal counsel will greatly help in clarifying the nuances and specifics of the law. Seek assistance from an attorney that has a full grasp of AB5 and other laws related to your profession and practice. A good legal counsel will also help you assess the risks involved. Incorporation Attorney has been helping professional and business owners for many years now. Setting up your private practice with Incorporation Attorney will put you on the right track as our legal team is an expert no matter how long a law has been enacted.
Our legal team will assist you with requirements, compliance, even the legwork. Rest assured and focus on the most valuable aspects of your business while we take care of the legal side. Call us today and let’s get down to business!
