The Referral Agency Exception To California’s Strict Independent Contractor Definition

When new Labor Code section 2750.3(g) goes into effect on January 1, 2020 as part of Assembly Bill (AB) 5, certain types of referral agencies may be able to avoid classifying  associated service providers as employees under the uber-strict Dynamex ABC standards.  See, California’s Independent Contractors (October 2019).

Only referral agencies that deal in specified industries are eligible:  those connecting clients or customers with service providers dealing in graphic and/or web design, photography, tutoring, event planning, minor home repair, furniture assembly, picture hanging, moving, errands, home cleaning, animal services, dog walking or grooming, pool cleaning or yard cleanup.

Such associated service providers must be either a sole proprietorship, corporation, partnership, limited liability company or limited liability partnership.

Additionally – and keeping with the previously prevailing “Borello” multi-factor balancing test for contractor vs. employee classification — the service provider must:

  • Be free from the referral agency’s direction and control;
  • Obtain and maintain any required state contractor’s license, business license and/or business tax registration;
  • Deliver services to the client/customer under the service provider’s name, not the name of the referral agency;
  • Provide its own tools and supplies;
  • Customarily engage in an independently established business of the same nature as the work performed;
  • Maintain its own clientele without any restrictions and remain free to seek work elsewhere including through a competing referral agency;
  • Set its own hours and terms of work and freely accept or reject clients and contracts without repercussion; and
  • Set its own rates without deduction by the referral agency.

See also:

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

Cindy Bamforth

November 8, 2019

Back to Blog

Contact Us

If you are an employer facing possible litigation or have an employee issue on which you need immediate guidance, call us to set up a consultation, or submit your message using our contact form.

NOTE: Use of this website does not make one a client of the Law Offices of Timothy Bowles (“Firm”). Establishing an attorney-client relationship and the confidentiality that comes with it depends on the Firm’s prior confirmation that no factor, including any conflict of interest (for example, our representation of another party adverse to you), exists to prevent that establishment. If you have confidential information that you would like to provide a Firm attorney, please communicate directly to one of our attorneys, in person, by telephone, email, fax or other written means. Do not use this website to offer or communicate confidential information about any legal matter.

(626) 583-6600 Menu
(626) 583-6600