We had an epic discussion a while back about classifying horse workers as employees vs. independent contractors.
CA recently passed a new law attempting to clarify the difference between the two. This article provides a nice summary and the ABC test so that a person can determine whether they are an employee or an IC:
Thought I’d post it here rather than tack it on the old discussion. Enjoy!
Very interesting how all of this will play out. The “gig” companies are putting serious money behind getting a ballot measure on the ticket in November here in CA that would allow some workers to still be classified as independent contractors.
I’m not in favor of this law - I think it’s incredibly frustrating in a lot of cases, and in some cases will make it much harder for people to pay each other money for things they do for and with each other.
I would say there are probably a lot of equestrian businesses that are no longer compliant with the law and I hope they have advisors to help them figure out their path to become compliant.
In summary, instead of the current IRS tests for independent contractors, the new law in California is the strict ABC test, where you must meet ALL prongs to be considered independent. (Some of this is due to an act of the legislature, and some is due to a court case against Uber last year.)
These are the prongs:
A. that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact,
”¢ B. that the worker performs work that is outside the usual course of the hiring entity’s business,
Ӣ C. that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed.
If you are running an equine business in California and paying anyone who works with your horses or your students via 1099 instead of as a W-2 employee you might want to investigate and consult with an advisor. (Paying your webmaster via 1099 would be fine, because it’s not in the same line of business as you.)
Could be problematic if you hire day grooms. Or, like my trainer, a pet sitter to cover the barn when he’s at a show. Although I guess you could argue that my trainer is not engaged in the pet sitting business? But it does draw a bright line for those barns described in the original COTH discussion that were hiring grooms, treating them as employees, and paying them under a 1099.
There is no doubt that a lot of people working in the gig economy are being exploited, so not a surprise that many of the companies that take advantage would fight this law.
Mis-categorizing employees as contractors isn’t confined to the horse business, it’s pretty widespread. Heck, we developed issues with it years back in our government work, and had to put all manner of safeguards in place - we basically were calling people whose schedule (“your working hours are x to y”) and daily work tasks we controlled “contractors”.
As someone who has both worked and paid via 1099, I think this test is overly restrictive and prevents a lot of mutually beneficial transactions that were not exploitative - in fact I made some pretty big money this way, and got all kinds of flexibility that the regular employees weren’t allowed, like the ability to take most Fridays off for horse shows and to plan my work schedule around my riding lessons. Later it’s what let me buy a farm in the sticks and work remote when employees were not allowed to do so.
The funny thing is that a lot of specific professions are exempted.
I am in favor of Uber being reined in because I think they are misleading and exploitative to their workers, but I also think this net is too wide. In particular, I would like to see a better blanket exemption for very short term arrangements.
That said… I’ve seen it used badly in the horse industry too, pretending that a high hourly contractor rate was comparable to a W-2 wage, when it is not.
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