New California law exempts home inspectors, making it easier for them to work as subcontractors

http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB2257

Governor just signed it.

The question(s) is… “WHY”? What’s the “Rub”??

Expected answer: “TAX Revenue”!!

It’s not really a new law, as much as it clarifies a previous law that went too far.

Notice, home inspectors are only except in a business to business transactions:

Hiring an employee and calling them an independent contractor just because you don’t want to deal with W2 taxes would still be illegal.

Hiring another inspector who has his/her own business because you need help for a day is now legal.

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How often can you hire “help” (another inspector with his own company) before they might be considered an employee?

The answer to that is “unlimited,” providing you are paying an entity, not a human. You can pay a company 1 million times and that will never cause the entity to be deemed an employee.

Thank you for that distinction! Great!

I am new at home inspections. I recently got my certification and I got in touch with a local home inspector that offer me work as an independent home inspector. He offer me 50% per inspection and he also made me sign an agreement where I can’t be his competition for a period of 2 years should I decide to no longer work for him. Since I am new and feel the need of getting experience I am trying to get that and have him provide me inspections since he already has the contacts. I wonder if what he is asking is fair. I’m not sure if you can give me some advise on this topic, but I don’t have anybody to go to.

Thank you in advance.

Welcome to our forum, Guillermo!..Enjoy!

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Thank you :+1:t3:

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It’s pretty clear that said inspector is confused about how labor law works,

You can’t be a 1099 Independent Contractor as an inspector working for another inspector.

Nor are non-complete clauses worth a darn.

50% split is also going to drive him out of business. By the time an owner pays employment taxes, workman’s comp, E&O insurance, software, tools, website, marketing costs, etc, etc, etc. there would be nothing left if he’s paying out 50%.

The main thing you need to find out about this offer is to get clarity on what is and what is not included as part of this deal.

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Thank you for the answer. I will be basically working 1099 he would not be paying anything other than the error and omissions insurance for his company since that is the name we are going to represent.

I hate multi-inspector firms to pieces. :skull_and_crossbones: :skull_and_crossbones: :skull_and_crossbones:

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This area is a minefield. For the hiring inspector, not Mr. Valdez.

This is legal information, and it is abridged for readability (so it is not complete). This is not legal advice.

AB 2257 expanded the explicit exemptions to AB 5 to include home inspectors.

This is not a carte blanche. It means that the employment relationship will be characterized according to the amount of control exercised over the hired worker under the older multifactor Borello standard rather than the “ABC” test applied post AB-5 and under Dynamex.

So an inspector can conceivably subcontract work to another, but the Borello factors must be satisfied or else an employment relationship will be found in the event of an employment dispute or labor claim. Without going into detail, if the hired inspector doesn’t have a bona fide separate inspection business of their own, and if the hiring inspector has total control over scheduling then an employment relationship will probably be found.

This turns into a nightmarish position for the hiring inspector under wage and hour law if anything goes wrong with the relationship. If multiple inspectors are being employed as 10-99s, woah nelly.

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I will give it a try for those 2 years, because meanwhile you will be getting hands on training.