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It is no surprise that certain states and groups want to impose burdensome regulations on business – but the current attack on independent contractors not only undermines successful business models, it also eviscerates the decision-making authority an individual has over himself.
Thus far, 33 states have adopted some form of the so-called “ABC test’” which is used to determine whether an individual should be classified as an employee or independent contractor. The most stringent of these was recently passed in California, under AB 5. Although other states have somewhat more lenient versions, ABC tests overall tend to be more restrictive than multi-factor tests.
Surprisingly, the Virginia House of Delegates has now taken steps to impose its own version of the ABC test by introducing HB 801 earlier this month. The ABC test in this bill looks like this:
A – “the individual has been and will continue to be free from control or direction over the performance of the services performed by the individual for wages, both under his contract of service and in fact;”
B – “The services are either outside the usual course of the business for which such services are performed or such services are performed outside of all the places of business of the enterprise for which such services are performed
C – “Such individual is customarily engaged in an independently established trade, occupation, profession, or business”
Unlike California’s AB-5, Virginia’s HB 801 includes two parts in prong B, either one of which will suffice for fulfilling that part of the test. This is a relief for the businesses and independent contractors that would be covered by HB 801, such those engaged in trucking. For example, although a driver’s job function might be directly related to the usual course of business of a trucking company, (i.e. trucking), the driver does not spend his time in the company’s headquarters or other facilities. Therefore, the driver has satisfied one prong of the B test and can remain an independent contractor and enjoy the benefits of being such (so long as he or she fulfills parts A and C of the test). Moreover, HB 801 is limited in its application—it applies only to individuals performing construction services, or delivery services, which is defined as “the transport and delivery of goods, products, supplies, or raw materials upon the highways of the Commonwealth.”
Although HB 801 includes the somewhat more lenient version of the ABC test, the fact that it imposes an ABC test at all points to a larger trend of states trying to restrict independent contractor relationships. Best keep an eye on the remaining 22 states…