EmploymentQuestion 645 of 1605
Under Labor Code §2781 (the construction-subcontractor exception to AB-5), a bona fide business-to-business relationship requires, among other things, that the subcontractor:
a.Owns its own real property used for business
b.Has been in business for at least 3 years and has filed corporate tax returns
c.Has at least 10 employees of its own
d.Is properly licensed under Bus. & Prof. Code §7000 et seq., has the required business license, maintains its own business location, and has a written contract — among other criteria
Explanation
Labor Code §2781 provides a separate, more permissive test for construction subcontractors: the sub must (1) be licensed by the CSLB, (2) have all required business licenses and tax registration, (3) have a written contract that specifies payment and scope, (4) maintain a separate business location, (5) have the right to hire and fire, (6) be customarily engaged in an independently established business, (7) provide its own tools and vehicles, and (8) negotiate its own rates. There is no 10-employee, real-property-ownership, or 3-year-in-business requirement. If §2781 criteria are not met, the AB-5 ABC test of §2775 applies instead.
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Reviewed by Abraham Chen — Licensed California General Contractor (CSLB License #1101856 — verify)