CA Passes AB 2257

“California AB 2257 Passes, Providing Relief for Golf Professionals and Caddies”

What this new legislation will mean to clubs in CA,
and the potential impact on caddie programs.

Yesterday CA’s State Assembly passed an urgent Repeal and Replace bill, titled AB 2257, designed to replace and dramatically amend the AB5 Law that went into place earlier this year in CA.  The AB5 Bill/Law was widely attacked by dozens of industries that heavily utilize independent contractors such as the golf industry – to include caddies and teaching professionals.  AB5 turned all caddies and part-time teaching professionals into employees of the Clubs at which they worked and sent shockwaves across the Golf Industry and the Country, (as many feared similar legislation would follow in other states), hurting the use of Caddies and part-time Golf Teaching Professionals.

AB5 was very clear that unless you passed the three-step test (known as the ABC Test), you were considered an employee of the hiring entity/business where you were working.  Given the nature of caddies providing services to clubs/members, the ABC test was hard to pass –  i.e., A) golf courses have a fair amount of control and direction over the caddies, B) caddying is ‘within the usual course of business’ of the clubs, and C) caddying is not established as an independent trade.

With the passage last night of AB 2257, CA Golf Clubs, Teaching Professionals, and more specifically, Caddies now have some relief from the ABC Test!

When Governor Newsom signs the bill into law later this week, AB 2257 will establish a new Section 2777 in the CA Labor Code to now allow a “Referral Agency” to act on behalf of multiple “Service Providers” under a contract to provide connections between clients (Clubs or golfers) and Service Providers (Caddies). Under this new exception to the ABC Test, Service Providers/Caddies providing services to Golf Club or Members via a Referral Agency (i.e. CaddieNow) are now considered Independent Contractors (IC’s) as long as they a) contract with the Referral Agency as IC’s and b) satisfy the key tenets of the “Borello Test” – a much easier test for Caddies to pass as IC’s.

Note: AB 2257 does nothing to change the way caddies would be treated if they deal directly with golf clubs – unfortunately those caddies and clubs would still fall under the ABC Test.  However, Caddies  signed on as IC’s to “Referral Agencies” are now in the clear to maintain IC status.  Note: simply allowing caddies to book a loop directly with a customer via app alone does not satisfy the “Referral Agency” provision.

While the dust is still settling on this surprising amendment to CA Law, the news seems to be good. Things seem to be heading back in a normal direction – whereby caddies using a referral agency like CaddieNow to book, schedule, rate, pay, and communicate with the customers/clubs/members are finally relieved of the arcane employment requirements previously instituted this January in AB5.

For additional context and detail, please refer to the following:

Text of the Entire Bill and Labor Code
Short Article in SF Chronicle

Bill Analysis by CA Assembly Yesterday

Law adds clarification with regards to “Referral Agencies” and makes the following new Exemption.

The Referral Agency Exemption 
“Referral agency” is a business that provides clients with referrals for service providers to provide services under a contract;

(B) Under this paragraph, referrals for services shall include but are not limited to, graphic design, web design, photography, tutoring, consulting, youth sports coaching, caddying, wedding or event planning, services provided by wedding and event vendors, minor home repair, moving, errands, furniture assembly, animal services, dog walking, dog grooming, picture hanging, pool cleaning, yard cleanup, and interpreting services.

2777. Section 2775 and the holding in Dynamex do not apply to the relationship between a referral agency and a service provider, as defined below, under the following conditions:

(a) If an individual acting as a sole proprietor, or a business entity formed as a partnership, limited liability company, limited liability partnership, or corporation (“service provider”) provides services to clients through a referral agency, the determination of whether the service provider is an employee or independent contractor of the referral agency shall be governed by Borello, if the referral agency demonstrates that all of the following criteria are satisfied:

(1) The service provider is free from the control and direction of the referral agency in connection with the performance of the work for the client, both as a matter of contract and in fact.

(2) If the work for the client is performed in a jurisdiction that requires the service provider to have a business license or business tax registration in order to provide the services under the contract, the service provider shall certify to the referral agency that they have the required business license or business tax registration. The referral agency shall keep the certifications for a period of at least three years. As used in this paragraph:

(3) If the work for the client requires the service provider to hold a state contractor’s license pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, the service provider has the required contractor’s license.

(4) If there is an applicable professional licensure, permit, certification, or registration administered or recognized by the state available for the type of work being performed for the client, the service provider shall certify to the referral agency that they have the appropriate professional licensure, permit, certification, or registration. The referral agency shall keep the certifications for a period of at least three years.

(5) The service provider delivers services to the client under the service provider’s name, without being required to deliver the services under the name of the referral agency.

(6) The service provider provides its own tools and supplies to perform the services.

(7) The service provider is customarily engaged, or was previously engaged, in an independently established business or trade of the same nature as, or related to, the work performed for the client.

(8) The referral agency does not restrict the service provider from maintaining a clientele and the service provider is free to seek work elsewhere, including through a competing referral agency.

(9) The service provider sets their own hours and terms of work or negotiates their hours and terms of work directly with the client.

(10) Without deduction by the referral agency, the service provider sets their own rates, negotiates their rates with the client through the referral agency, negotiates rates directly with the client, or is free to accept or reject rates set by the client.

(11) The service provider is free to accept or reject clients and contracts, without being penalized in any form by the referral agency. This paragraph does not apply if the service provider accepts a client or contract and then fails to fulfill any of its contractual obligations.

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