While AB5's ABC Test is the default, California Labor Code Section 2750.3 provides several exemptions. Workers in exempt categories are instead evaluated under the multi-factor Borello test, which is generally more favorable to independent contractor status.
Major Exemption Categories
1. Licensed Professionals
The following licensed professionals are exempt from AB5:
- Lawyers
- Architects
- Engineers
- Private Investigators
- Accountants (CPAs)
- Securities Broker-Dealers
- Investment Advisers
- Direct Sales Salespersons
- Commercial Fishermen
- Real Estate Agents (with conditions)
- Repossession Agencies
2. Business-to-Business (B2B) Exemption
Contractors operating as a separate business entity may qualify if ALL 12 criteria are met:
- Business entity is free from control and direction
- Business provides services to the contracting business rather than its customers
- Contract is in writing
- Business has required licenses/permits
- Business has its own location separate from hiring entity
- Business is customarily engaged in independent work
- Business can contract with others
- Business advertises and holds itself out to public
- Business provides its own tools and materials
- Business can negotiate its own rates
- Business can set its own hours (consistent with completing work)
- Business is not performing work for only one company
3. Professional Services Exemption
Certain professional services are exempt if specific conditions are met:
| Profession | Key Requirements |
|---|---|
| Marketing | Sets own rates, own clients, maintains business location |
| Human Resources | Experience requirement, business entity, multiple clients |
| Travel Agents | Registered seller of travel, issues own invoices |
| Graphic Design | Specialized training/skill, control over work |
| Grant Writers | Own clients, negotiates rates |
| Fine Artists | Creates original works |
| Photographers/Videographers | Newspaper/photojournalist specific requirements |
| Freelance Writers/Editors | Content limit: 35 submissions per year per outlet (controversial) |
The Borello Test (Replacement Test)
If exempt from AB5, the S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) test applies. This is a multi-factor "totality of circumstances" test:
Primary Factor: Right to Control
The most significant factor is whether the hiring entity has the right to control the manner and means by which work is accomplished.
Secondary Factors
- Whether the worker is engaged in a distinct occupation or business
- Whether the work is usually done under employer supervision or by specialist without supervision
- Skill required for the occupation
- Whether the principal or worker supplies tools and place of work
- Length of time services are performed
- Method of payment (by time vs. by job)
- Whether the work is part of the regular business of the principal
- Whether the parties believe they are creating an employer-employee relationship
- Whether the worker has opportunity for profit or loss
Recent Legislative Updates
AB5 has been amended several times since 2020:
- AB 2257 (2020): Expanded exemptions for musicians, translators, interpreters
- Prop 22 (2020): App-based drivers (Uber, Lyft, DoorDash) carved out
- AB 1506 (2021): Newspaper carriers and distributors
Compliance Checklist
- Determine if any exemption applies to your contractor relationship
- If B2B exemption: verify ALL 12 criteria are met
- If professional services exemption: verify profession-specific requirements
- If no exemption applies: apply ABC Test
- If exempt: apply Borello Test factors
- Document your analysis
- Consult employment counsel for complex situations