The letters are coming! If you have employees in California, chances are you have or will receive your detailed EDD AB5 Notification. This letter is co-authored by four government agencies – the Employment Development Department, the Labor Commissioner Division of Labor Standards Enforcement, the Chief of Occupational Safety, and the Division of Workers Compensation, which opens the door to four agencies aside from the IRS potentially auditing for IC compliance. Now all employers have been notified. It’s assumed that this notification might be the state’s way of alerting companies about this sweeping legislation. The letter seems to set the stage for audits, reviews, and maybe even new reporting requirements. The enforcement of AB5 is still to be determined. However, if you are managing your own 1099s, we highly recommend a documented process and documented determination of eligibility and continued eligibility.
Having talent in California is no easy feat! We anticipate many revisions and exclusions for AB5 (such as truck driver exclusions) but in the meantime, the best thing to do is to get compliant. For many companies, AB5 may seem fairly simple and straightforward. Nonetheless, there are many cases where it is difficult to clearly identify the status of the talent being engaged. If you haven’t received a copy of the letter, you can view it here: EDD AB5 Notification.