AB 816 California Assembly · 2025-2026 Regular Session

Employment: employees and independent contractors: merchandisers.

Summary

Existing law requires a 3-part test, commonly known as the "ABC" test, to determine if workers are employees or independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission. Under the ABC test, a person providing labor or services for remuneration is considered an employee rather than an independent contractor unless the hiring entity demonstrates that the person is free from the control and direction of the hiring entity in connection with the performance of the work, the person performs work that is outside the usual course of the hiring entity's business, and the person is customarily engaged in an independently established trade, occupation, or business. Existing law charges the Labor Commissioner with the enforcement of labor laws, including worker classification Existing law exempts certain occupations and business relationships from the application of the ABC test described above. Existing law, instead, provides that these exempt relationships are governed by the multifactor test previously adopted in the case of S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341. These exemptions include professional services provided by graphic designers, fine artists, content contributors, and various others, subject to meeting specified conditions. This bill would create an exemption for a merchandiser contracting with a bona fide business or hiring entity to provide stand-alone in-store inventory and product placement labor or services on behalf of retailers and brands in the consumer-packaged goods industry, as specified.

Issues: ✓ Labor & Employment

Bill status failed 1 of 4 stages cleared

Introduction

Feb 2025

Committee Review

Floor Vote

Governor

Introduced Feb 19, 2025 Last action Feb 2, 2026

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What changed between versions

02/19/25 - Introduced → 03/13/25 - Amended Assembly · 6 edits · Mar 13, 2025

MODERATE

The amendment adds an entirely new Section 2778 to the Labor Code that exempts a wide range of 'professional services' workers from the strict ABC test (Dynamex) and instead applies the more flexible Borello multifactor test. The headline addition is a specific exemption for merchandisers who perform stand-alone in-store inventory and product placement work for consumer-packaged goods retailers, subject to conditions including voluntary registration, freedom to negotiate pay, no supervision or control, and employer-provided occupational accident insurance. The amendment also adds exemptions for real estate licensees, home inspectors, and repossession agencies.

Scope change

The bill's scope expanded significantly from a narrow technical amendment to Section 2776 (business-to-business contracting) to also include an entirely new Section 2778 that carves out numerous professional service occupations and the merchandiser category from the ABC test, applying the more permissive Borello standard instead. This substantially broadens which workers can be classified as independent contractors.

SCOPE

New Section 2778 created, exempting 'professional services' workers from the ABC test and applying the Borello test instead. Covered occupations include marketing professionals, HR administrators, travel agents, graphic designers, grant writers, fine artists, enrolled agents, payment processing agents, photographers/videographers, freelance writers/editors/illustrators, content contributors, licensed beauty professionals, master class performers, appraisers, registered professional foresters, and merchandisers.

ELIGIBILITY

New merchandiser exemption (paragraph P of Section 2778(b)(2)): exempts individuals who voluntarily register as merchandisers to provide stand-alone in-store inventory and product placement services for consumer-packaged goods retailers and brands. Conditions include: ability to freely negotiate or voluntarily accept pay terms; work performed without supervision, direction, or control; employer carries private occupational accident insurance; employer does not require acceptance of specific contracts, training, or specialized equipment; and no restriction on working with other businesses outside the contract.

New exemptions for real estate licensees (governed by Business and Professions Code Section 10032(b) or Borello), home inspectors (subject to Chapter 9.3 of Division 3 of the Business and Professions Code), and licensed repossession agencies (governed by Section 7500.2 if free from control and direction).

REQUIREMENT

General conditions for the professional services exemption include: maintaining a separate business location; holding required business licenses or tax registrations (for work performed more than six months after the effective date); ability to set or negotiate own rates; ability to set own hours outside project completion dates and reasonable business hours; being customarily engaged in the same type of work with another hiring entity or holding oneself out to other potential customers; and customarily exercising discretion and independent judgment.

FISCAL

Fiscal committee review changed from 'no' to 'yes,' indicating the bill now requires fiscal committee analysis, likely due to the expanded scope and new insurance requirements for merchandiser employers.

TECHNICAL

Section 2776 text had minor corrections: 'are satisfied' changed to 'are met' and 'such the services' corrected to 'the services.' These are nonsubstantive drafting fixes.

Floor votes

How they voted

No floor votes recorded yet.

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Amendments

Feb 2, 2026

Lower · Passed

From committee: Filed with the Chief Clerk pursuant to Joint Rule 56.

lower

Mar 17, 2025

Committee

Re-referred to Com. on L. & E.

lower

Mar 13, 2025

Introduced

From committee chair, with author's amendments: Amend, and re-refer to Com. on L. & E. Read second time and amended.

lower

Mar 13, 2025

Committee

Referred to Com. on L. & E.

lower

Feb 20, 2025

Lower · Passed

From printer. May be heard in committee March 22.

lower

1 primary · 0 co-sponsors