AB 504 narrows the reach of Section 2775 and the Dynamex/ABC test for a specified category of "professional services." Instead of the automatic ABC framework, the bill requires hiring entities to establish a six-part showing to have worker status resolved under the older Borello multi-factor balancing approach.
The measure lists dozens of covered occupations — from graphic designers and grant writers to enrolled agents, photographers, freelance writers, and licensed cosmetology professionals — and attaches service-specific requirements (written contracts, licensing, 1099 rules for salon space rentals, and a six‑month licensing trigger). For employers, salons, and contractors, the bill changes both the evidentiary burden in classification disputes and day-to-day contracting and tax-reporting practices.
At a Glance
What It Does
The bill excludes defined "professional services" from California's Section 2775/Dynamex test and directs courts to apply the Borello balancing analysis only when the hiring entity demonstrates a six-factor checklist showing the worker operates as an independent business. It also enumerates a long list of covered professions and adds occupation-specific rules.
Who It Affects
Independent contractors and small-business service providers in creative, professional, and beauty fields (photographers, writers, graphic designers, enrolled agents, estheticians, manicurists, barbers, cosmetologists), plus the businesses that hire or rent space to them, payroll and tax administrators, and California labor enforcement bodies.
Why It Matters
The change replaces a bright-line classification standard with a conditioned, documentary approach that both raises the employer's proof obligations and creates pathways for genuine small businesses to be treated as contractors. That combination will alter contracting practices, tax reporting (including 1099 flows), and the contours of misclassification litigation.
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What This Bill Actually Does
AB 504 creates a carve-out for a specified category of "professional services" by removing those services from the reach of Section 2775 and the Dynamex holding. For contracts that fall within the defined categories, the bill does not automatically apply the ABC test; instead, it requires the hiring entity to establish, affirmatively, that the worker satisfies a set of six attributes that characterize an independent business.
Those attributes cover where the individual operates, licensing and tax registration when locally required, autonomy over rates and hours, an existing book of business or availability to other clients, and habitual exercise of independent judgment in performing the work.
The bill defines "professional services" with considerable specificity. Several creative and intellectual-service occupations are listed and, for many of them, the statute adds operational requirements: photographers, photo editors, videographers and their digital-aggregator relationships must work under written contracts that fix rates and payment timing and must not be replacing employees at the same volume; freelance writers and translators must have written agreements addressing pay, intellectual property, and payment timing; marketing work must be original and creative; and some licensed professionals must maintain business licenses.
A distinct set of rules targets licensed estheticians, electrologists, manicurists, barbers, and cosmetologists — requiring direct client payment, rate-setting, scheduling control, separate business licensing and, where services are provided at a hiring entity’s location, a 1099 from the contractor to the salon or business owner. The statute oddly provides that the esthetician/manicurist carve-out becomes inoperative for manicurists on January 1, 2025.The bill also clarifies that certain occupations are handled outside this section by other statutes: real estate licensees are governed by Business and Professions Code Section 10032(b) (and, where that does not apply, by specific rules for unemployment insurance, workers’ compensation, and otherwise Borello); home inspectors and licensed repossession agencies remain subject to their respective regulatory code provisions.
Practically, AB 504 shifts classification fights from a straightforward ABC inquiry to an evidentiary dispute about documentary indicia of independent-business status, and it builds into many relationships contract-level requirements that will affect how businesses draft agreements, collect payment, and report taxes.
The Five Things You Need to Know
The hiring entity must affirmatively demonstrate all six specified factors (separate business location, required business license/tax registration after six months when locally mandated, ability to set or negotiate rates, ability to set hours outside deadlines and reasonable business hours, a book of business or availability to other clients, and regular exercise of discretion) before Borello governs.
Work performed more than six months after the section’s effective date in jurisdictions that require a business license or tax registration triggers a contractor licensing requirement for the services provided under the contract.
Photographers, videographers, photo editors, freelance writers, translators, and certain content contributors must work under written contracts that specify rates, intellectual property rights, and payment timing and must not be directly replacing an employee at the same volume.
Licensed estheticians, electrologists, manicurists, barbers, and cosmetologists must set their own rates, process payments directly from clients, maintain their own business license, control scheduling, and, when providing services at a hiring entity’s location, issue a Form 1099 to the salon or business owner — but the manicurist-specific clause becomes inoperative on January 1, 2025.
Real estate licensees, home inspectors, and repossession agencies are excluded from this section and remain governed by their existing Business and Professions Code or other statutory provisions; the bill further instructs that a responsible broker’s statutorily imposed duties are not factors under Borello.
Section-by-Section Breakdown
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Conditional return to Borello via a six-factor proof requirement
This paragraph is the operational engine: it removes the automatic application of the Dynamex standard for contracts that meet the bill’s "professional services" definition and mandates that the hiring entity prove a six-point list to invoke Borello. Practically, that converts classification disputes into documentary fights where location evidence, licensing, rate-setting records, scheduling practices, client lists, and examples of independent judgment become central. Because the statute phrases the six items conjunctively, failure on any single factor risks reverting the analysis to the default regime the bill displaces for covered services.
Precise occupations and work-character rules that qualify as 'professional services'
This subsection enumerates the occupations and attaches descriptive thresholds that determine inclusion. It distinguishes original, creative marketing and varied human-resources administration from routinized labor, designates travel agents, grant writers, graphic designers, fine artists, enrolled agents, payment processors via ISOs, appraisers and registered professional foresters, among others. For many categories the bill requires that the work be non‑standardized, original, or predominantly intellectual — language designed to separate independent professional output from tasks that more closely resemble employee work performed on an employer’s timetable.
Contract and non-replacement conditions for photographers, writers, and content contributors
The statute protects many digital-creative roles but conditions that protection on written contracts that allocate pay, payment timing, and intellectual-property terms. It also bars the carve-out when the contractor is performing the same work at the same volume as an employee for that hiring entity. Those two features mean that an otherwise freelance creative can qualify for Borello only when the parties document the engagement and the contractor is not, in effect, an in-house substitute — a factual line that will produce litigation over volume and functional equivalence.
Specific operational criteria and a 1099 rule for salon professionals
For licensed estheticians, electrologists, manicurists, barbers, and cosmetologists the bill lists five operational requirements: independent rate-setting, direct client payments, control over hours and clients, a separate book of business and scheduling, and a maintained business license. Additionally, if the contractor works at the hiring entity’s premises the contractor must issue a Form 1099 to the salon or business owner from which they rent space. The provision contains an explicit temporal limitation: it becomes inoperative with respect to licensed manicurists on January 1, 2025, creating a time-limited rule for that subgroup.
Statutory carve-outs: real estate, home inspectors, and repossession agencies
This part preserves existing statutory frameworks for certain regulated occupations. Real estate licensees remain subject to Business and Professions Code Section 10032(b) or, if that doesn’t apply, to the unemployment insurance and workers’ compensation statutes and Borello for other Labor Code purposes; the bill also instructs courts not to treat responsible‑broker duties as Borello factors. Home inspectors and repossession agencies keep their current code-specific standards. These cross-code references limit AB 504’s displacing effect and create a patchwork of different tests across professions.
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Explore Employment in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Experienced freelance creatives (photographers, videographers, photo editors, graphic designers, freelance writers): the bill preserves a pathway to independent-contractor status where contracts, IP allocation, and non-replacement facts are documented, enabling continued client-side freelancing without mandatory employment classification under the ABC test.
- Licensed professionals who operate genuine independent practices (enrolled agents, appraisers, registered professional foresters): the statutory language recognizes professional licensing and business-registration practices as indicia of independent status.
- Hiring entities that rely on bona fide contractors (agencies, content platforms, salons that rent space): these organizations can retain contractor relationships for covered professions if they collect and preserve the documentary proof the statute requires.
- Digital content aggregators and licensing intermediaries: the bill expressly contemplates aggregator-licensee relationships for photographers and similar creators, clarifying that those distribution arrangements can fit within the professional-services carve-out.
Who Bears the Cost
- Small salons and salon owners who rent chairs: they may face new 1099 issuance requirements, verification of contractors’ business licenses, and contract-redrafting obligations; failure to comply could create IRS or labor exposures.
- Hiring entities generally (marketing firms, publishers, app-based platforms): employers must maintain documentation to prove each of the six factors for covered contractors, increasing compliance and recordkeeping costs and raising litigation risk if records are incomplete.
- California labor and tax agencies: enforcement will involve more detailed fact-finding across many discrete professions, increasing investigatory complexity and resource needs to adjudicate documentary disputes.
- Contractors who lack business infrastructure (new or hobby practitioners): workers without a separate business location, business license, or a book of business may lose the benefit of independent-contractor status and be exposed to reclassification despite being treated as independent in practice.
Key Issues
The Core Tension
The central dilemma AB 504 tries to solve is familiar: protect workers from disguised employment while preserving space for genuine small-business contractors. The bill favors the latter for a long list of professions but only if hiring entities can assemble documentary proof of independent-business attributes — a solution that grants flexibility to some while imposing heavier compliance, reporting, and litigation burdens on others.
The bill sets up multiple practical and legal frictions. First, applying Borello conditioned on a conjunctive six-factor list transforms classification disputes into evidentiary inquiries about documentary indicia, but it does not specify standards of proof or permissible documentary forms — courts will have to decide what constitutes adequate proof of a "book of business" or of "customary exercise of discretion." That creates predictable litigation over the sufficiency and form of evidence (contracts, invoices, client lists, booking records, bank deposits) and increases the value of good contract hygiene.
Second, several provisions introduce operational traps. The 1099-from-contractor-to-salon rule flips typical tax reporting practice in some chair-rental models and creates a mismatch risk with how payments are actually processed; the six-month licensing trigger forces contractors and hiring entities to monitor local licensing regimes continuously; and the manicurist provision’s stated inoperability date raises questions about transitional effects and whether the allowance was intended to be temporary.
Finally, occupation‑specific doctrines (non-replacement, original creative character, or intellectual-varied HR work) rely on fact-intensive and context-dependent lines that will spawn disputes over whether particular tasks are "essential" or merely incidental.
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