Families hiring caregivers must use extra caution after what AB5 means for in-home care
Your babysitter, housekeeper and caregiver are your employee, that’s what the AB5 Law means for in-home care in California.
Caregivers, babysitters, nanny’s and housekeepers cannot be independent contractors under what AB5 means for in-home care. It’s one reason to make sure you hire a household employee legitimately or use a full-fledged and licensed employer model agency to avoid liability.
The California legislature continues to make the hiring of independent contractors more legally treacherous, and AB5 provided another incentive to classify employees correctly. Think of this as the reaction to the rise of the gig economy, companies like Uber, Lyft, and Door Dash, all three of whom pledged millions of dollars to fight AB5 by putting a challenge on the ballot.
The app agencies banded together to get California voters to exempt them and allow some drivers to stay classified as independent contractors through Proposition 22 in 2020, which was successful. The app agencies also filed a lawsuit challenging the constitutionality of how the law was applied to them in California. But an 11-judge panel of the 9th Circuit Court of Appeals Decision on AB5 upheld the law as constitutional.
But California’s in home care industry did not get any special carve out or exemption from AB5, despite California lawmakers exempting many jobs and businesses, including “referral agencies” that match workers and customers.
(However, consumer should be wary that a recent change from the Department of Labor final rule regarding what constitutes “co-employment” and misclassification of workers. This could mean an even bigger risk for families who think using referral agencies really saves them money. That’s because especially in California, a caregiver is never an independent contractor. So that means both the referral agency or the family could be jointly liable for payroll violations, tax violations or failing to provide sick pay for worker’s compensation coverage. Hiring a private caregiver and not doing it properly can be costly.)
For many other industries, such as in home health care, what AB5 means for in-home care is staggering. It still stands as law and clients need to make sure they are protected from misclassifying caregivers as independent contractors. California’s strict worker classification got even stricter.
Under California Assembly Bill 5 AB5, which went into effect on January 1, 2020, all workers are defined as “employees” in California, with very limited carve outs. The legislature wrote that its intent “in enacting this act is to ensure workers who are currently exploited by being misclassified as independent contractors instead of recognized as employees have the basic rights and protections they deserve under the law…”
Attorney Elizabeth Murphy held a webinar for home health providers explaining what AB 5 means for the in home care industry and others.
She said basically, under AB5, anyone hiring someone else for services must be deducting payroll taxes, providing worker’s compensation insurance, paid sick leave, unemployment and applicable health benefits, protections against discrimination and harassment, etc.
Or people can hire services through a legitimate business that’s handling all of those employer responsibilities. Services known as Domestic Referral Agencies, or DRA’s, must follow very strict guidelines to make sure they are not employers. That leaves the responsibility on the client who uses the registries, such as care.com, and AB5 leaves no wiggle room for the clients to get out of that responsibility.
Some professions were excluded, such as doctors, dentists, veterinarians, licensed real estate agents, lawyers, architects, engineers, private investigators, accountants, licensed estheticians, manicurists, commercial fishermen and newspaper delivery people. The exception doesn’t mean that they are automatically independent contractors, but that a less stringent test than AB5’s three part test can be used to determine their status.
AB5’s three part test, called the ABC Test, says someone is only a true independent contractor if they meet all three of these standards:
- Free from the control and direction of the hiring entity,
- Performing work that is outside the usual course of the hiring entity’s business,
- The person is customarily engaged in an independently established trade, occupation or business.
A homeowner hiring a licensed plumber to do repairs does not become the employer under the rules above. However, a babysitter is told when to arrive and leave and how to care for the kids; a caregiver is given a schedule by a family and controlled, etc. So payroll taxes and employment benefits apply.
In fact, AB5 specifically names in-home employees in the new rules; “including the care and supervision of children, or whose duties are personal”.
Violating the rules can lead to civil litigation and expensive demands for wage and hour corrections. There are also criminal penalties, $5,000 to $25,000 per violation depending on the severity.
At Home Nursing Care is a full service in home care agency providing homecare, home health and care management in San Diego and Los Angeles counties. We are fully compliant with employment matters and protect our clients from employment liability. All of our caregivers and nurses are full W2 employees, protecting our community from risks associated with AB5.
We provide great benefits to our employees, such as $90,000 in grant money they earned just for completing education. More satisfied employees lead to better care for clients.
In conclusion, what AB5 means for inhome care is simple, don’t hire caregivers as independent contractors, follow employment rules including proper pay, overtime, sick time, unemployment insurance, payroll taxes and more.
Then decide if if hiring a private, or independent caregiver, is really cheaper.
