Courtesy :  California Physical Therapy Association 

AB 5 (Gonzalez): This bill codified the decision in the Dynamex case and clarified its application. The Dynamex ruling, which went into effect April 30, 2018, changes the standard for the line between independent contracting and employment to be defined by a three-pronged test, referred to as the “ABC test” by many. Under the ABC test, a worker will be deemed to be an employee unless:

  1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  2. The worker performs work that is outside the usual course of the hiring entity’s business; and
  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed. 

Under the Business-to-Business exemption, a service provider has a business that is providing services to another business. If the business service provider can prove the criteria under this section, then the Borello test applies.

The business service provider must show:

  • The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, 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.
  • The contract with the business service provider 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 to perform the services.
  • The business service provider can negotiate its own rates.
  • Consistent with the nature of the work, the business service provider can set its own hours and location of work
  • The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required, pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

Under this exception, it appears at first glance that one physical therapist practice (business) could provide physical therapist services to another practice. But the second criteria above seems to defeat this – the provider is not providing services to the physical therapy practice itself. Rather, the physical therapist is providing service to the customers/patients of the contracting business. This exemption does not appear to work for physical therapists.

AB 5 threatens the existence of contracting relationships for physical therapists and physical therapist assistants who clearly choose to work in such an arrangement.

Here are examples of how PTs and PTAs may be impacted by AB 5.

Physical therapists provide services in a variety of settings. Many are employed, and they clearly do and
should enjoy all the rights and protections afforded under California law. However, there are many who
choose to provide services as independent contractors for a variety of reasons (beginning of career;
interest in therapy specialty and services provided; desire for entrepreneurship; etc.) who may be
inappropriately affected by the Dynamex ruling. Additionally, this ruling—if an exemption is not
granted—WILL negatively impact the access to services for many. We urge the inclusion of an exception
for physical therapists and possibly healthcare providers in general to ensure that access remains in
place for Californians.
Here are some examples:
• Services to patients in the community. Physical therapists often work independently by choice,
in some cases to accommodate family needs or simply because they prefer the diversity. As an
example, a physical therapist may be assigned to provide physical therapy to patients in the
home environment following a significant health event, such as a stroke, traumatic brain injury,
or orthopedic injury (such as an ACL tear). As a known community-based therapist, a hospital or
other agency may give their name to patients in need. They may turn down a patient due to
scheduling or geographical restrictions. If they agree to treat a patient, from that point on,
everything the physical therapist does is independent. As authorized by their license and scope
of practice, they independently evaluate, assess and develop a treatment plan for the specific
patient’s needs. They schedule appointments directly with the patient. They bring and use their
own equipment in working with the patient. They use their own judgement in making
determinations about the duration and intensity of treatment. They bill insurance companies,
when relevant, directly for their services. The same is true in nursing homes, in which a physical
therapist may have a patient or multiple patients, but not enough for a facility to employ a
physical therapist. Those patients in need are served by physical therapists specializing in
geriatric populations, and these physical therapists may work in many facilities in a given
community. Both of these models demonstrate complete independence and should be
exempted from the application of the Dynamex ruling.
• Services to nonprofits or schools. Physical therapists sometimes provide services to nonprofit
organizations, such as health clinics in urban or rural settings or through Regional Centerpurchased services for Californians with intellectual or developmental disabilities, or to schools,
who must provide physical therapy services in order to comply with the federal Individuals with
Disabilities Education Act (IDEA). Regarding the latter, there are physical therapists employed
by school districts. However, either because of scale (i.e., rural setting, where there are a small
number of students who qualify for such services) or availability, some of these services are
provided by contractors, many of whom are independent, and this may be just one part of their
practices. Some organizations and schools simply don’t have enough work to fully employ a
physical therapist and, therefore, the contracting relationship may be the only way for them to
meet the needs of the people they serve and to comply with existing statutes

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