Resources for Yoga Alliance Members in the State of California Regarding AB5
As many of you may already know, Governor Gavin Newsom signed California Assembly Bill 5 (“AB5”) in September 2019, which goes into effect on January 1, 2020. In short, this legislation sets forth a three-part test for determining if an individual is an employee or an independent contractor. Although this bill’s original focus was on gig economy workers, it will affect many businesses and individuals throughout the state, including operators of yoga teacher training programs, which tend to be yoga studios, as well as yoga teachers.
Below is a brief overview of AB5.
- As of January 1, 2020, to hire someone as an independent contractor, an employer must prove that:
- The worker is free from the hiring entity’s control and direction in connection with performing the work;
- The worker is doing work that is outside the usual course of the hiring entity’s business; and
- The worker is customarily engaged in an independent trade, occupation, or business in that industry.
- If any of these three conditions are not met, then the individual must be classified as an employee. Although AB5 contains some specific job and industry exemptions, none apply to yoga schools, studios, or teachers, thereby bringing the yoga industry within the scope of the three-part standard set forth above.
Yoga Alliance has compiled the resources below to help its members with this transition. Of course, we will be working to provide additional support as needed in the new year.
- Offer Letter Template:
All independent contractors should receive an offer letter prior to or on January 1, 2020, setting forth the terms of their employment. Studios will need to consider rate of pay and scheduling when drafting their offer letters, keeping in mind that tax withholdings will impact teachers’ take-home pay.
- Notices to Provide Newly Hired Employees at the Time of Hire:
All employers should provide the below documents and notices to employees at the time of hire. There may be additional city and/or local requirements, particularly with regards to paid sick leave ordinances. Schools, studios, and other employers should check to ensure these local requirements are also being met.
- Workers’ Compensation Time of Hire Pamphlet
- Sexual Harassment Pamphlet (DFEH-185P)
- CFRA Pamphlet (if the school or studio is covered by CFRA, 20+ or 50+ employees)
- EDD Disability Insurance Pamphlet (Form DE 2515)
- Paid Family Leave Pamphlet (Form DE 2511)
- Wage and Employment Notice to Employees (Labor Code section 2810.5)
- New Health Insurance Marketplace Coverage Options and Health Coverage Form (Form OMB No. 1210-0149)
- General Notice of Consolidated Omnibus Budget Reconciliation Act (COBRA) (continuation coverage rights if 20+ employees and employer offers health plan)
- Rights of Victims of Domestic Violence, Sexual Assault, and Stalking Notice
- Permit to Employ and Work (B1-4) on file for each minor (if the school or studio hires minors)
- New Hire Forms:
Newly hired employees must complete the documents below, which which employers must maintain.
- Federal W-4 (tax withholding)
- California DE-4 (tax withholding)
- Federal I-9 (Employment Eligibility Verification – to be completed within three days of the employee’s start date)
- New Employee(s) Report Form DE 34:
Employers must file a new employee(s) report with the Employment Development Department within 20 days of their hire dates. More information on reporting requirements can be found at the EDD’s website.
In addition, there are other considerations that employers, be them yoga training schools and/or studios, need to consider:
- Confidentiality, non-disclosures, and/or proprietary information agreements;
- Handbook and/or other employment policies;
- Sexual harassment training, which is required for any employer with 5+ employees; and
- Arbitration Agreements.
With respect to this last consideration, studios may want to present newly converted employees with voluntary arbitration agreements. Also effective on January 1, 2020, is AB51, which prohibits employers from conditioning employment on agreement to arbitration. However, this practice is still permitted throughout the month of December. Studios should consider whether to convert independent contractors to employees prior to January 1, within the context of having arbitration agreements executed. If after January 1, arbitration agreements can still be presented to employees, but an employee’s refusal to sign cannot be a reason for termination of employment/refusal to hire.
We have also curated the list of resources from our archives that discuss this topic of employee classification and what you need to know.