AB 816 removes Section 2775 and the California Supreme Court’s Dynamex standard from a list of defined “professional services,” and requires the Borello multi-factor test to determine employee vs. independent contractor status if the hiring entity demonstrates a set of six listed factors. The bill also enumerates many covered occupations — from graphic designers and enrolled agents to freelance writers, photographers, salon professionals, and a narrowly defined category of merchandisers — and sets occupation-specific conditions.
This matters because it substitutes a more flexible, fact‑intensive standard (Borello) for a broad, worker‑protective rule (Dynamex/ABC) for many common gig and creative roles, while adding a bespoke safety-net of requirements for merchandisers (including a hiring-entity insurance obligation). That combination changes who bears the evidentiary burden, which professions will routinely qualify as contractors, and how employers should document relationships to avoid misclassification risk.
At a Glance
What It Does
The bill excludes specified “professional services” from Section 2775 and the Dynamex/ABC test and directs courts to apply the older Borello test if the hiring entity proves six enumerated factors (business location separate from hiring entity, required business license after six months, ability to set rates, ability to set hours, availability to other clients, and exercise of independent judgment). It also lists numerous occupations that qualify as professional services, each with tailored conditions.
Who It Affects
Independent workers in creative, professional, and personal‑services industries (graphic designers, freelance writers, photographers, enrolled agents, certain salon professionals, merchandisers) and the businesses that engage them — particularly retailers and consumer packaged‑goods brands that contract in‑store merchandisers. Labor lawyers, compliance officers, and HR teams who handle contractor classifications will be directly affected.
Why It Matters
By shifting many relationships back to Borello when a hiring entity meets defined criteria, the bill reduces the automatic presumption of employee status under Dynamex for a wide swath of gig and white‑collar work. That alters documentation strategies (licenses, contracts, evidence of business operations) and introduces an industry‑specific requirement (private occupational accident insurance) for merchandisers.
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What This Bill Actually Does
AB 816 creates a carve‑out from Section 2775 and the Dynamex decision for a substantial catalog of “professional services.” The practical effect is procedural and substantive: if a hiring entity can establish six specific conditions about how the individual operates — including maintaining a separate business location (which can be a home), the ability to set rates and hours, engagement with other clients, and the exercise of independent judgment — then the Borello test (a multi‑factor, common‑law analysis) governs classification instead of the Dynamex/ABC framework. That shifts both which framework applies and who carries the initial burden to prove contractor status.
The bill does not create an open‑ended list; it defines “professional services” with a long sublist of occupations and service types. Some categories are unconditional (graphic design, grant writing, appraisers, enrolled agents), while others carry tailored limits — for example, photographers, videographers, and freelance writers qualify only if they work under written contracts with specified payment and IP terms, do not replace employees at the same volume, do not primarily perform work at the hiring entity’s location, and are free to work for others.
Salon professionals must meet several business‑style conditions (set rates, process payments, keep their own client books) and, in certain in‑salon cases, issue a Form 1099 to the salon owner.A discrete, detailed carve‑out covers merchandisers who provide stand‑alone in‑store inventory and product placement services for retailers and CPG brands. To qualify, the merchandiser must voluntarily register with the business, be able to negotiate or accept terms freely, perform work unsupervised, and not be required to accept specific contracts, training, or tools; the hiring entity must carry private occupational accident insurance for registrants and must not restrict the merchandiser’s ability to work for others.
These requirements function as both substantive criteria and compliance checkpoints that hiring entities will need to document.Finally, AB 816 preserves separate statutory governance for a few licensed occupations: real estate licensees, home inspectors, and repossession agencies remain subject to their respective Business and Professions Code provisions (and, where applicable, unemployment insurance or workers’ compensation rules), rather than the new professional‑services carve‑out. Taken together, the bill creates a hybrid regime that grants more contractor flexibility to specified professionals while setting occupation‑specific guardrails and shifting the practical burden of proof onto hiring entities.
The Five Things You Need to Know
The hiring entity must demonstrate all six statutory factors (separate business location, post‑6‑month business license where required, ability to set or negotiate rates, ability to set hours outside of deadlines, customary engagement with other clients, and regular exercise of independent judgment) for Borello to replace Dynamex.
If work continues beyond six months and local law requires a business license or tax registration, the individual must obtain that license or registration to qualify under this exemption.
Merchandisers qualify only if they voluntarily register, perform unsupervised stand‑alone in‑store inventory/product‑placement services, are free to negotiate terms, are not required to accept specific contracts/training/tools, and the hiring entity carries private occupational accident insurance for registrants.
Photographers, videographers, photo editors, freelance writers, translators, and similar content professionals must work under written contracts specifying pay, IP allocation, and payment timing, must not be directly replacing an employee at the same volume, must not primarily work at the hiring entity’s location, and must be free to work for others.
The bill explicitly leaves certain licensed roles (real estate agents, home inspectors, repossession agencies) governed by their existing Business and Professions Code or unemployment/workers’ compensation rules, rather than this professional‑services carve‑out.
Section-by-Section Breakdown
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General carve‑out and Borello trigger
This subsection removes Section 2775 and the Dynamex holding from applying to contracts for “professional services” and sets the condition that Borello applies only if the hiring entity proves every one of six enumerated factors. Practically, this makes the hiring entity’s initial proof burden determinative: classification disputes will start with whether those six factual predicates are established rather than immediately invoking the ABC/Dynamex presumption. Litigators will focus discovery on evidence that shows where the worker operates from, licensing, rate‑setting, scheduling autonomy, outside engagements, and instances of independent judgment.
The six required factors (business operations and autonomy)
These clauses operationalize the Borello trigger. They require (1) a separate business location (which can be a residence), (2) a business license/tax registration if locally required after six months, (3) the ability to set or negotiate rates, (4) control over hours aside from deadlines and normal business hours, (5) an established practice of working for other hiring entities, and (6) regular exercise of discretion. Each factor is fact‑specific, which means compliance teams will need contemporaneous documentation (invoices, contracts, schedules, marketing materials, insurance, license copies) to show the relationship truly resembles an independent business.
Enumerated professional services and occupation‑specific rules
This subsection lists a broad set of qualifying services — marketing (with a creativity requirement), HR administration (if predominantly intellectual and non‑standardized), graphic design, grant writing, fine artists, enrolled agents, appraisers, foresters, certain travel agents, and others. For many categories the bill adds occupation‑specific predicates (for example, marketing work must be original/creative; enrolled agents must be federally authorized). Compliance must map the worker’s actual duties to the statutory descriptions rather than rely on job titles.
Content creators, photographers, and freelance writers — contract and non‑replacement limits
Photographers, videographers, photo editors, freelance writers, translators, illustrators, and similar contributors qualify only under written contracts that specify rate, payment timing, and intellectual property terms. Two important operational limits are imposed: the individual must not be directly replacing an employee doing the same work at the same volume, and the individual must not primarily work at the hiring entity’s business location. These limits are intended to prevent employers from using the exemption to offload regular employee roles onto contractors.
Salon professionals and merchandisers — business practices and insurance requirement
Licensed estheticians, electrologists, manicurists, barbers, and cosmetologists qualify only if they set rates, process payments, maintain a client book, carry their own business license, and (when working at the hiring entity) issue Form 1099 to the salon owner; the manicurist clause contains a built‑in inoperative date for manicurists. The merchandiser clause is detailed: a merchandiser must voluntarily register, freely negotiate or accept terms, perform without supervision, be free to work for others, and the hiring entity must carry private occupational accident insurance for registrants. These provisions create administrable checkpoints but also impose new operational obligations on hiring businesses.
Express carve‑outs governed by other codes
This subsection states that certain licensed professions remain governed by the Business and Professions Code or other specified statutory schemes: real estate licensees are governed by a Business and Professions Code provision (and, depending on applicability, unemployment or workers’ compensation statutes); home inspectors are governed by the home‑inspector chapter; and repossession agencies are governed by their licensing statute when free from control. That keeps existing role‑specific frameworks intact rather than folding them into this bill’s professional‑services exemption.
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Who Benefits
- Freelance creative and knowledge workers (graphic designers, grant writers, freelance writers, certain photographers and video professionals) — they gain a clearer path to contractor status when they meet the statute’s contract, IP, and operational conditions, reducing the automatic presumption of employee status under Dynamex.
- Retailers and CPG brands that engage merchandisers — the statute creates a defined contractor pathway for stand‑alone merchandisers, enabling continued use of flexible in‑store labor models if the hiring entity complies with the registration, non‑supervision, and insurance conditions.
- Hiring entities seeking predictable classification outcomes — businesses that maintain documentation (licenses, contracts, insurer coverage, independent contractor agreements) can make a stronger case for contractor relationships under Borello when the six factors are demonstrably present.
- Specialized professionals with federal or state licensing (enrolled agents, appraisers, registered foresters) — the bill explicitly recognizes these regulated roles, reducing classification ambiguity tied to licensing status.
- Talent marketplaces and platforms that facilitate contracting for enumerated services — clearer statutory categories can reduce matchmaking friction and legal uncertainty for listed professional services.
Who Bears the Cost
- Hiring entities and brands using merchandisers — they must carry private occupational accident insurance for registrants and collect and retain evidence showing all six Borello‑trigger factors, increasing administrative and insurance costs.
- Small businesses and salons that rely on licensed personal‑services practitioners — they must adjust billing, scheduling, and recordkeeping practices (including 1099 issuance in certain in‑salon situations) to preserve contractor relationships.
- Labor enforcement agencies and courts — fact‑intensive Borello inquiries will require more investigative and adjudicative resources to evaluate whether the six statutory criteria truly exist in practice.
- Workers who do not meet the statute’s technical predicates — individuals who perform the same work but cannot demonstrate separate business operations, licensing, or written contracts may remain subject to Dynamex and thus be classified as employees, creating an uneven outcome within the same occupation.
- Companies that misapply the carve‑out — businesses that treat ineligible roles as contractors without the required documentation risk costly misclassification litigation, back pay, and penalties.
Key Issues
The Core Tension
The bill pits two legitimate objectives against one another: enabling independent professionals and commercial flexibility (by restoring Borello for many occupations) versus protecting workers from employer control and erosion of labor rights (the protective clarity Dynamex provided). The statute attempts a middle path through occupation‑specific rules and evidentiary gates, but the central dilemma remains whether narrowly tailored exemptions and documentation requirements can prevent employers from reclassifying dependent workers while preserving legitimate contractor relationships.
AB 816 combines a categorical list of professional services with a procedural gatekeeper: the hiring entity must affirmatively prove six operational factors for Borello to apply. That design creates practical ambiguity about the evidentiary standard and timing — for example, what documentary threshold satisfies “the individual is customarily engaged” in outside work, or what precisely shows the individual “regularly exercises discretion.” Courts will need to define how contemporaneous documents, marketing materials, and tax filings factor into the Borello trigger, and employers will need conservative documentation strategies to survive scrutiny.
The merchandiser provisions introduce an industry‑specific insurance obligation and several behavioral limitations (no required training/tools, unsupervised work, voluntary registration). Those rules aim to protect merchandisers from employer control while enabling contractor models, but they raise questions about enforceability and gaming: a hiring entity could structure interactions to appear to meet the letter of the law while maintaining de facto control (scheduling by KPI demands, scripted tasks, or quota enforcement).
The “not replacing an employee at the same volume” standard for content creators and the salon 1099 requirement are similarly fact‑sensitive and likely to generate litigation over volume comparisons and what constitutes primary performance at the hiring entity’s location. Finally, the presence of an inoperative date for manicurists in a bill introduced in 2026 creates drafting oddities that regulators and courts will have to reconcile with statutory construction principles.
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