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Home Affordable Care Act CA AB2257 and Its Impact on ACA and Pay Equity Compliance

CA AB2257 and Its Impact on ACA and Pay Equity Compliance

2 minute read
by Robert Sheen

2 minute read:

California’s AB 5 has forever changed how employers work with freelance workers; that much is certain. A new bill, however, may provide relief for employers that work with certain types of freelance workers.

The bill, officially called AB 2257, was signed into law by California Governor Gavin Newsom on Friday, September 4 and goes into effect immediately. The law amends provisions of AB 5 that create exemptions for specific types of workers. Specifically, the law removes the provision that caps the amount of freelance work writers and photographers can provide to an employer before being considered an employee.

Additionally, AB 2257 recasts some of the exemptions for workers of the professional services and music industries. As quoted from the bill, AB 2257 will:

  1. Establish an exemption for services provided by a still photographer, photojournalist, videographer, or photo editor, as defined, who works under a written contract that specifies certain terms, subject to prescribed restrictions;
  2. Establish an exemption for services provided to a digital content aggregator, as defined, by a still photographer, photojournalist, videographer, or photo editor;
  3. Establish an exemption for services provided by a fine artist, freelance writer, translator, editor, content contributor, advisor, narrator, cartographer, producer, copy editor, illustrator, or newspaper cartoonist who works under a written contract that specifies certain terms, subject to prescribed restrictions;
  4. Exempt from the ABC test people who provide underwriting inspections and other services for the insurance industry, a manufactured housing salesperson, subject to certain obligations, people engaged by an international exchange visitor program, as specified, consulting services, animal services, and competition judges with specialized skills, as specified.

San Diego Assemblywoman Loren Gonzalez said in a press release, “AB 2257 represents a comprehensive framework for employment law that makes a clear distinction between employer-employee relationships and professionals that run their own independent businesses.”

As a reminder to employers, AB 5 effectively expands the definition of the word employee and determines employee status based on the “ABC” test. And while AB 2257 does loosen some of the requirements of AB 5, the fact of the matter is that employers will still need to be careful about how they classify their workers.

For workers that are reclassified as employees, employers should account for tracking hours of services, wages, and other employee-level details for ACA compliance and reporting purposes, as required by the Employer Shared Responsibility Provisions, also known as the Employer Mandate.

As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA’s Employer Mandate, organizations with 50 or more full-time employees and full-time-equivalent employees are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is affordable for the employee, or be subject to Internal Revenue Code (IRC) Section 4980H penalties. The healthcare law defines full-time employees as workers who average 30 hours of work a week or 130 hours a month.

Employers, be sure to incorporate these newly classified employees into your ACA compliance process. Employers will need to extend offers of health insurance coverage to more employees, and reporting requirements will grow in complexity. The volume of forms to be processed will increase, along with the costs associated with distributing 1095-C Forms to employees and submitting required ACA information to the IRS annually.

As more independent contractors become full-time employees under the ACA, employers should seek out expert ACA compliance services to prepare for the increased demands of ACA compliance.

We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.

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