California AB5: How it affects you

On January 1, 2020, the California Assembly Bill 5 (AB5) goes into effect. The law places limitations on a company’s ability to  classify workers as independent contractors and requires them to use a three-part test to prove these workers are independent contractors.

What is California AB5?

AB5 is a new California law meant to provide labor protections like overtime and minimum wage to workers who don’t currently receive them as independent contractors. It also will bring in more tax revenue from companies that prefer to save costs by hiring independent contractors (who have smaller take-home wages due to tax laws).

To use independent contractors, companies must prove that:

1. The hiring entity does not control or direct the worker’s work, both under the contract terms and in fact

2. The worker’s work is outside the hiring entity’s usual business

3. The worker has an independently established trade, occupation or business in the same nature as the work they’re performing

If a company cannot prove all three, they will unable to classify workers as independent contractors.

How does California AB5 affect temporary healthcare workers?

Fortunately, physicians — including locum tenens physicians — are exempt from the three-part independent contractor test.

However, healthcare companies must use the “ABC test” to determine if other locum tenens (PAs, NPs and CRNAs) and travel healthcare professionals (nurses, therapists, lab techs, and other professions) qualify as independent contractors.

Here’s what that means for healthcare professionals: If you are not a locum tenens physician, you must be a W-2 employee. If you intend to remain a 1099 independent contractor, you may be unable to provide services in California.

This law also limits the ability of healthcare facilities in California to employ temporary healthcare workers who are currently independent contractors. In most cases, they will be required to hire them as W-2 employees or bring on temporary workers who are employed by and have W-2 status with another organization such as CompHealth.

How can CompHealth help companies comply with AB5 and still hire temporary healthcare workers?

Because all CompHealth non-physician locum tenens and travel healthcare professionals are W-2 employees (employed by CompHealth), they already meet all the California AB5 requirements.

CompHealth also takes care of provider compensation and malpractice coverage and has a comprehensive, Joint Commission-approved credentialing process to ensure you receive the best healthcare providers possible at your facility.

Learn more about the services CompHealth provides to employers.

Why should healthcare professionals work with CompHealth?

When you work with CompHealth, you become an employee with W-2 status, even when you are only working short-term assignments. This means you comply with the California AB5 law and can take temporary jobs in California. It also means you’re eligible for full, day-one company benefits. These include mental and dental insurance, 24/7 telehealth service, a 401K plan, basic life insurance, and even pet insurance if you need it.

When you work with CompHealth, you also receive full-service licensing and credentialing assistance, private housing, and comprehensive malpractice insurance. Check out the full list of CompHealth’s employee benefits.

Whether you operate a healthcare facility in California or are a healthcare professional interested in working in California, CompHealth can help you comply with the new California AB5 law. Call us today at 800.453.3030 to learn more.