Home services businesses - cleaning, handyman, HVAC, landscaping, pest control, and similar services - commonly use contractor models. AB5 significantly impacts these arrangements.
Industry Analysis
House Cleaning Services
Risk Level: HIGH
Cleaning companies that dispatch cleaners to homes almost always fail AB5:
- Prong A: Company often sets schedules, rates, methods
- Prong B: Cleaning IS the cleaning company's business
- Prong C: Cleaners rarely have independent businesses
Recommendation: Employ cleaners as W-2 employees
Handyman/Repair Services
Risk Level: MODERATE-HIGH
Depends on licensing status:
- Licensed contractors: May qualify for construction exemption
- Unlicensed handymen: Almost always employees under AB5
HVAC / Plumbing / Electrical
Risk Level: MODERATE
Licensed trades may use the construction subcontractor exemption if all requirements met (CSLB license, workers' comp, etc.)
Landscaping
Risk Level: HIGH for workers, MODERATE for businesses
- Individual landscaping workers: Usually employees
- Licensed landscape contractors: May qualify for exemption
- Day laborers: Always employees
Pest Control
Risk Level: HIGH
Pest control technicians performing the company's core service are employees, not contractors.
The Platform Problem
Home Services Platforms (Handy, TaskRabbit, Thumbtack)
Platforms connecting home service providers with customers face significant AB5 risk. Unlike Uber/Lyft (covered by Prop 22), home services platforms have no carve-out. Workers dispatched through these platforms in California may be employees of the platform.
Compliant Business Models
Employee Model
Hire service providers as W-2 employees:
- Full control over work quality and methods
- Can use your company's branding, uniforms, equipment
- Provide benefits, workers' comp, unemployment
- Higher cost but full legal compliance
Referral-Only Model
Transform into a true referral service:
- Connect customers with independent service providers
- Provider sets own rates, controls work
- Provider has own business, insurance, marketing
- Your company only provides leads
- Less control over quality
B2B Subcontracting
Contract with incorporated service businesses:
- Subcontractor is legitimate business entity
- Subcontractor has own employees, insurance
- Subcontractor has multiple clients
- Must meet all 12 B2B criteria
Workers' Compensation Considerations
Home services work has injury risks. Workers' comp requirements:
- Employees: Must have workers' comp coverage
- True contractors: Should have their own workers' comp
- Misclassified contractors: Creates uninsured employer exposure