AB5 allows for bonafide business-to-business contracting in addition to complying with the ABC Test Loop-holes are difficult to find in the new law AB5. There are however some exemptions that may allow a business to still work with independent contractors and still comply with AB5's stipulations.

One way to pass the ABC Test right out of the starting gate is to ensure the company you are working with has all the requisite licensing and business formation to be a bonafide entity vs that of an individual. Next is to find out what SIC (Standard Industrial Code) your business entity falls within. Next you'll need to ensure the entity you are contracting to meets parts A, B and C, but some research may be required in order to ascertain that the entity claims and services a different SIC business category than your entity.

For example, if you are a house cleaning service entity (SIC code 734922) and wish to subcontract cleaning jobs to another company, to pass the ABC Test, they'd need to NOT be of the same SIC code as your company (734922).

There are multiple services that you could contract with that are in a different SIC code, appearing to be compliant with AB5's ABC Test requirements. If a business entity you are currently sub-contracting work to is of the same SIC as yours, either one have to be operating a cleaning business of a different SIC code. The critical need for your business is for your sub-contractor to be able to know the scope of work needed for your job site, and be able to provide it without control or training.

In the example of house cleaning, one entity might perform work as a Janitorial entity (SIC code 734902) and possibly be able to subcontract to a Maid Service (SIC code 734923) or a House Cleaner (SIC code 734492).

This is not a guaranteed way to pass the ABC Test, due to the SIC base index being similar (7349), however the extended 6, 7 and 8 digit codes are one way to consider a possible loop-hole or compliance for using a contractor.

734901 Venetian Blinds-Cleaning
734902 Janitor Service
734903 Ventilating Systems-Cleaning
734904 Window Cleaning
734905 Wall Cleaning
734906 Window Shades-Cleaning & Repairing
734907 Roof Cleaning Solvents & Services
734908 Property Maintenance
734909 Building Cleaning-Exterior
734910 Snow Removal Service
734911 Building Maintenance
734912 Building Cleaning-Interior
734913 Chemical Cleaning-Industrial
734914 Ceiling Cleaning
734915 Cleaning Services-Industrial
734916 Chimney & Fireplace Cleaning Build/rpr
734917 Condominium Maintenance
734918 Cleaning-Roof Patio Sidewalk & Etc
734919 Floor Waxing Polishing & Cleaning
734920 Filters-Air & Gas-Cleaning Service
734921 House Washing-Exterior
734922 House Cleaning
734923 Maid & Butler Service
734924 Mobile Homes-Washing & Cleaning
734925 Lot Cleaners
734926 Chimney Tops & Caps
734927 Floor Degreasing
734928 Restaurant Cleaning
734929 Awnings & Canopies-Cleaning
734930 Floor Polish & Wax
734931 Gutter & Downspout Cleaning
734932 Apartment Cleaning
734933 Kitchen Exhaust Systems-Cleaned
734934 Flues
734935 Restaurant Hood & Duct Cleaning
734937 Clean Rooms-Service & Cleaning
734938 Chimney Screens
734939 Mildewproofing
734940 Vacuum Cleaning Contrs-Bldg Interior
734941 Vertical Blinds-Cleaning & Repairing
734942 Townhouse Maintenance Contractors
734944 Restroom Sanitation
734946 Store Front Cleaning
734947 Environmental Cleaning Services
734949 Estate Cleaning
734950 Restaurant Equipment Cleaning
734951 Biological Waste Clean-Up
734952 Rubbish Garbage & Trash Chute Cleaning
734953 Cleaning Services-Commercial/residential
734954 Catch Basin Building Cleaning/repairing
734999 Building Cleaning/maintenance Services
7349001 Building Cleaning/maintenance Services
7349002 Office Cleaning
7349003 Janitor Services
7349004 Cleaning Services -Industrial
7349005 Window Cleaning
7349006 House Cleaning
7349007 Chimney & Fireplace Cleaning Build/repair
7349008 Building Maintenance
7349009 Ventilating Systems-Cleaning
7349010 Floor Waxing Polishing & Cleaning
7349011 Office Cleaning Or Charring
7349012 Lighting Maintenance Services
7349013 Chemical Cleaning Services
7349014 Venetian Blinds-Cleaning
7349015 Building Component Cleaning Services
7349016 Exhaust Hood Or Fan Cleaning
7349017 Acoustical Tile Cleaning Services
7349018 Hospital Housekeeping
7349019 School Custodian Contractors
7349020 Building Cleaning Services
7349021 Service Station Cleaning & Degreasing
7349022 Telephone Booth Cleaning & Maintenance
7349023 Wall Cleaning
7349024 Window Shades-Cleaning & Repairing
7349025 Roof Cleaning Solvents & Services
7349026 Property Maintenance
7349027 Building Cleaning-Exterior
7349028 Snow Removal Services
7349029 Building Cleaning-Interior
7349030 Chemical Cleaning-Industrial
7349031 Ceiling Cleaning
7349032 Condominium Maintenance
7349033 Cleaning-Roof Patio Sidewalk
7349034 Filters-Air & Gas-Cleaning Services
7349035 House Washing-Exterior
7349036 Maid & Butler Services
7349037 Mobile Homes-Washing & Cleaning
7349038 Lot Cleaners
7349039 Chimney Tops & Caps
7349040 Floor Degreasing
7349041 Restaurant Cleaning
7349042 Awnings & Canopies-Cleaning
7349043 Floor Polish & Wax
7349044 Gutter & Downspout Cleaning
7349045 Apartment Cleaning
7349046 Kitchen Exhaust Systems-Cleaned
7349047 Flues
7349048 Restaurant Hood & Duct Cleaning
7349049 Clean Rooms-Service & Cleaning
7349050 Chimney Screens
7349051 Mildew Removal & Control
7349052 Vacuum Cleaning Contractors-Building Interior
7349053 Vertical Blinds-Cleaning & Repairing
7349054 Townhouse Maintenance Contractors
7349055 Restroom Sanitation
7349056 Store Front Cleaning
7349057 Environmental Cleaning Services
7349058 Estate Cleaning
7349059 Restaurant Equipment Cleaning
7349060 Biological Waste Clean-Up
7349061 Rubbish Garbage & Trash Chute Cleaning
7349062 Cleaning Services -Commercial/residential
7349063 Catch Basin Building Cleaning/repairing
73490000 Building Maintenance Services, Nec
73490100 Building And Office Cleaning Services
73490101 Building Cleaning Service
73490102 Building Maintenance, Except Repairs
73490103 Hospital Housekeeping
73490104 Janitorial Service, Contract Basis
73490105 Lighting Maintenance Service
73490106 Office Cleaning Or Charring
73490107 School Custodian, Contract Basis
73490108 Service Station Cleaning And Degreasing
73490200 Building Component Cleaning Service
73490201 Acoustical Tile Cleaning Service
73490202 Air Duct Cleaning
73490203 Chimney Cleaning
73490204 Floor Waxing
73490205 Exhaust Hood Or Fan Cleaning
73499901 Chemical Cleaning Services
73499902 Cleaning Service, Industrial Or Commercial
73499903 Maid Services, Contract Or Fee Basis
73499904 Telephone Booth Cleaning And Maintenance
73499905 Window Blind Cleaning
73499906 Window Cleaning

This could effectively put to rest any concerns for AB5 compliance.

Another path to consider is to become a licensed state contractor as a handyman or other non-specific category for any jobs that total more than $500. If both companies become licensed contractors, then so long as the scope of work being performed was within the license they have, one contractor could sub-contract to the other entity. The entities could be identical or different types of business and still qualify for this exemption as it is delineated in AB5.

You may want to have your attorney draft or look over the contract between yourself and the entity which you are sub-contracting to, and add a clause that indemnifies you and your entity should any agency deem, settle, adjudicate or make any new law as to categorize the relationship as that of an employee and employer instead of the intended independent contractor relationship.

Many small and medium-sized businesses have opted to enlist the services of a Professional Employer Organization (PEO) to make reclassification less burdensome. TEXT US us if you'd like to learn more how a reputable PEO serving your industry can help call 1-760-413-9274. CALL US

Your PEO should be able to provide close estimates regarding the direct costs associated with classifying each person as an employee, including taxes, impact on workers’ compensation insurance, health insurance, unemployment insurance, and more factors.