If you’re self-employed, or thinking about it, or you know someone who is self-employed, THIS IS IMPORTANT! We need to take action now to protect our right to be hired and paid on a business-to-business basis as independent contractors.

On March 8, 2021 the U.S. House of Representatives passed the PRO Act that includes the “ABC Test” that’s part of the controversial California law AB-5. The ABC Test is a huge problem for us as independent consultants because part B states that an independent contractor must perform work that is outside the usual course of business of the hiring entity. This means that as an independent consultant, you can't subcontract to another consulting firm, nor can you hire subcontractors to help you with your own consulting work. Instead, you would have to be hired (or hire others) as a temporary employee on a W-2 tax basis, not on a 1099 tax basis. This is a big deal for us as self-employed professionals because how you are paid affects how much tax you owe…

Recent and pending legislation around the country threatens our livelihoods as self-employed professionals. Here’s how to fight back! #RepealAB5 #NoProACT #ProAct #AB5

About two months ago, the California Supreme Court issued a unanimous decision in the case Dynamex Operations West Inc. v. Superior Court that is likely to result in it being harder to qualify as an independent contractor.

More than ever, it’s critical that you take steps now to maximum your chances of passing what is likely to become a stricter vendor compliance process. Otherwise, it’s very likely that companies will demand that you do the work as a W-2 employee hired through a staffing agency. (Related video, “Friends Don’t Let Friends W-2”*)

Although this court decision directly affects only California companies, other states are likely to follow suit and use this ruling as a reference.  At the very least, it’s likely to make employers in other States more cautious when hiring consultants as independent contractors.