AB 5: A Consultant/Business Owner’s Perspective

“This is what your clients will soon be thinking and doing under AB 5. It will change your consulting practice,” writes Walt Maclay, a successful business owner/consultant, in an email to this author. Maclay was following up on the presentation he gave to fellow consultants at a recent CNSV event on the unintended repercussions of AB 5 on highly skilled technology consultants. AB 5 is the recently signed law intended to protect so-called gig workers (e.g. Uber drivers).

In the above video, Maclay discusses real-world impacts of AB 5, such as the possibility that a sub-contractor may not have other clients, as required by the law. Maclay explains that he would have no way of verifying his subcontractors’ consulting status given non-disclosure agreements that clients often have with contractors.

Another requirement is that a consultant advertises her services, but, as Maclay points out, the definition of advertising can be ambiguous. Maclay provides an example of how the EDD (Employment Development Department) determined that a consultant’s website didn’t qualify as “advertising” because of the way it was worded and, as such, classified that individual as an employee.

One of the consultants in the audience points out the ambiguity of the “ABC” (for an explanation of the criteria to determine whether an individual is an employee, check out this link from the same CNSV meeting) test and how the definition of “B” often can be interpreted differently and that reasonable people could disagree on whether a person is an employee or a contractor.

Because of the issues that existing law has created, Maclay requires his consultants to be part-time employees. He states that these former contractors aren’t happy with this arrangement and neither is he. He suggests that AB 5 creates an even greater level of uncertainty for him and other consultants going forward.

Some highlights from the above interview:

03:57 – Why can’t the consultants you hire show you the 1099s of their other clients?
04:35 – What if I end up having to work at the client’s location?

Note: Viodi is a CNSV member 

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