Assembly Bill 5 has been passed and is soon to be signed by the Governor. It exempted medical doctors but did not exempt nurses, nurse practitioners or physician assistants from the legislation.
The bill prevents US, NPs PAs, and RN from being independent contractors in the State of California. LOCUMS IS DEAD.
You can not work in California UNLESS YOU ARE AN EMPLOYEE. I loved being a 1099 contractor and doing locums. I guess I will be moving out of State to continue my career. Look out....this kinda of crap could be coming for your state too.
Do you know what will happen to pay per patient (if we are not hourly)? How would that work on W2?
I'm not an accountant but based on my experience as a prior employee you can expect to keep around 68% of your income if you are transferred from contractor to employee because of California's high tax rate.
Example: You get paid $60 for each exam you do
As a contractor you got paid the full $60 and handled quarterly taxes on your own with whatever deductions for business expenses you can justify.
Now you will have $40.80 per patient after taxes with the new law. It sucks.
I bet this oversight will be changed. They never get much right the first time and the door is already open to exemptions.
I hope you are correct. Before the final bill was approved by the California Senate, the few Republicans we have in California tried to amend the law with making exemptions for us and a variety of other health care workers. The Democrats who have a super majority voted to not add the amendments to the bill and so here we are.
I'm not an accountant but based on my experience as a prior employee you can expect to keep around 68% of your income if you are transferred from contractor to employee because of California's high tax rate.
Example: You get paid $60 for each exam you do
As a contractor you got paid the full $60 and handled quarterly taxes on your own with whatever deductions for business expenses you can justify.
Now you will have $40.80 per patient after taxes with the new law. It sucks.
Yeah, that’s what I was afraid of, that’s a lot of income to lose ?
It looks like it would be a better option to establish a corporation as a business entity, and then work business to business (where they pay to my corp, and then I pay myself with W2, S-Corp) - it looks like that’s allowed. Sucks so much though since I’m not sure if it would make it harder to find jobs in the future since not all employers would want to pay to a corporation.
I'm a S Corporation and my attorney is not convinced I can get around the law by being incorporated. My CPA is also looking into but gave me the same response. I've never had a problem with a hospital, clinic or private provider paying me as a corporation. You just give them your EIN number and their payroll takes care of the rest. That shouldn't be an issue.
I'm a S Corporation and my attorney is not convinced I can get around the law by being incorporated. My CPA is also looking into but gave me the same response. I've never had a problem with a hospital, clinic or private provider paying me as a corporation. You just give them your EIN number and their payroll takes care of the rest. That shouldn't be an issue.
Oh, no, why did they think you can’t get around it?
Based on what I’ve read - the business to business relationship is allowed in AB5 with the 12 extra provisions. And my understanding is that then clinic pays you and you give W2 to yourself?
If you don’t mind me asking, what reasons did attorney give for possibly not being able to get around this law?
He didn't . He is a good friend of mine and I had him look at the law via my cellphone while we were drinking margaritas. I'll see him again this weekend and pick his brain. He mentioned in his brief opinion the spirit of the law is to make all contractors employees except for the exempted groups and trying to use a S corp or a LLC to avoid AB5 might prove difficult to defend if the State's Treasurer decided to pursue legal action. Again it was just a brief opinion.
He didn't . He is a good friend of mine and I had him look at the law via my cellphone while we were drinking margaritas. I'll see him again this weekend and pick his brain. He mentioned in his brief opinion the spirit of the law is to make all contractors employees except for the exempted groups and trying to use a S corp or a LLC to avoid AB5 might prove difficult to defend if the State's Treasurer decided to pursue legal action. Again it was just a brief opinion.
Oh ok, that totally makes sense, but I just hope that with corporation, they won't see us as an employee anymore, but just as a business entity and then hopefully it will be ok, but who knows. I'll be contacting a couple attorneys in the next few days. Did you incorporate as a nursing or a medical corporation?
My understanding is also that we need to be partnered with an MD if we do it as medical corp, and I have collaborating agreement with MD through my job already, so I was thinking to do it as nursing corp.
I'm a S corp and it is a nursing corp. I've copied and pasted below the business to business exemptions if you want to check them out.
A business to business contracting relationship, is exempt from the “ABC” test if the contracting business demonstrates that all of the following criteria are satisfied:
The business service provider is free from the control and direction of the contracting business entity, both under the contract for the performance of the work and in fact;
The business service provider is providing services directly to the contracting business rather than to customers of the contracting business;
That might be hard to get around.
The business service contract is in writing;
If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration;
The business service provider maintains a business location that is separate from the business or work location of the contracting business;
The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed;
The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity;
The business service provider advertises and holds itself out to the public as available to provide the same or similar services;
The business service provider provides its own tools, vehicles, and equipment;
The business service provider negotiates its own rates;
The business service provider sets its own hours and location of work; and
The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required.
Note: This subdivision does not apply to an individual worker, as opposed to a business entity.
Additionally, all of the below factors must be met for the exemption to apply to the above listed “professional services”:
The individual maintains a business location (may be residence) that is separate from hiring entity. The individual may choose to perform services at the hiring entity’s location;
If work is performed more than six months after January 1, 2020, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in his or her profession;
The individual has the ability to set or negotiate his or her own rates for the services performed;
Outside of project completion dates and reasonable business hours, the individual may set the individual’s own hours;
The individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other customers as available to perform the same type of work; and
The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.
I'm a S corp and it is a nursing corp. I've copied and pasted below the business to business exemptions if you want to check them out.
A business to business contracting relationship, is exempt from the “ABC” test if the contracting business demonstrates that all of the following criteria are satisfied:
The business service provider is free from the control and direction of the contracting business entity, both under the contract for the performance of the work and in fact;
The business service provider is providing services directly to the contracting business rather than to customers of the contracting business;
That might be hard to get around.
The business service contract is in writing;
If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration;
The business service provider maintains a business location that is separate from the business or work location of the contracting business;
The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed;
The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity;
The business service provider advertises and holds itself out to the public as available to provide the same or similar services;
The business service provider provides its own tools, vehicles, and equipment;
The business service provider negotiates its own rates;
The business service provider sets its own hours and location of work; and
The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required.
Note: This subdivision does not apply to an individual worker, as opposed to a business entity.
Additionally, all of the below factors must be met for the exemption to apply to the above listed “professional services”:
The individual maintains a business location (may be residence) that is separate from hiring entity. The individual may choose to perform services at the hiring entity’s location;
If work is performed more than six months after January 1, 2020, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in his or her profession;
The individual has the ability to set or negotiate his or her own rates for the services performed;
Outside of project completion dates and reasonable business hours, the individual may set the individual’s own hours;
The individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other customers as available to perform the same type of work; and
The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.
Yes, that's what I was looking at also and I agree that the point about "customers" is the one that is hard to fit, but I think (well, I hope!) what they mean is customers as in another company, such as when you work as a subcontractor, but clinic patients would not technically be considered "customers" since they are an inherent part of the clinic business and without them the clinic would not exist, so the patients are a part of the business, so to say. But these are just my thoughts...
Could you let us know what your attorney friend says once you guys chat?
Great question. The California legislative session is over for 2019. The spring of 2020 is when they will convene again. The CANP sent me an email stating they are "having discussions" to add NPs as exempt. I'm not sure the CAN wants an exemption so my guess in your situation would still get paid per patient but get paid as a W2 employee. This will lower your income as your employer has to pay both side of the Medicare/SS tax. I would suspect home health RNs would all become employees too of the agencies that employ them with similar outcomes.
Hi, just realized I missed this message from you, so awesome that you contacted CANP with this!
They definitely need to ad NP’s to exempt categories, many of us like the flexibility of 1099, other similar structured professions were exempted, but for some reason not NP’s.
I didn’t think of contacting CANP, that’s a great idea - will write to them as well.
Please guys - write to NP organizations and encourage them to propose to ad NP’s as exempt from AB5!
We want to be able to keep the flexibility and higher income potential, and simply speaking - we should have a choice of how we want to work.
Maybe the intent was to make it harder in negotiations for hospitals to refuse demands by unions. They know they can rely on locums staff to carry the workload while staff strikes. In this instance now they will not have that safety net to rely on and possibly will have to give in more to union demands. Just playing devil's advocate.
Maybe the intent was to make it harder in negotiations for hospitals to refuse demands by unions. They know they can rely on locums staff to carry the workload while staff strikes. In this instance now they will not have that safety net to rely on and possibly will have to give in more to union demands. Just playing devil's advocate.
I believe that would be a stretch. Cali is the hotbed of the tech industry and where the on-line on-demand service model was more or less created. Those are the companies they are targeting as more people sign up to do the work but often put themselves at risk as they are seen as contractors and keep the companies far from liability. Travel nursing is often the group used to fill hospital ranks during strikes and are typically W2 employed.
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I'm not an accountant but based on my experience as a prior employee you can expect to keep around 68% of your income if you are transferred from contractor to employee because of California's high tax rate.
Example: You get paid $60 for each exam you do
As a contractor you got paid the full $60 and handled quarterly taxes on your own with whatever deductions for business expenses you can justify.
Now you will have $40.80 per patient after taxes with the new law. It sucks.