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The commercial real estate market, in many ways, dodged AB 5, a new California State law the substantially restricts the use of subcontractors. In addition to real estate brokers, the construction industry is exempt under the new law. With already steep construction costs, the exemption was a relief to the industry.

“It is possible that AB 5 may have less of an impact on the construction industry than other industries such as the gig economy because the law specifically exempts traditional construction subcontractor relationships from its reach,” Dwayne McKenzie of Cox, Castle & Nicholson, tells GlobeSt.com. “AB 5 states that the ABC test of the Dynamex decision does not apply to the relationship between a contractor and an individual who is performing work under a subcontract, so long as a number of specific requirements are all satisfied, including that the subcontract is in writing, that the subcontractor is licensed by the Contractors State License Board and that the work is within the scope of such license. The law also recognizes that other professionals in the construction industry, including architects, engineers, and lawyers, are exempt from the three-factor test.”

Kelsi Maree Borland

Kelsi Maree Borland is a freelance writer and editor living in Los Angeles whose work has appeared in such publications as Travel + Leisure, Angeleno and Los Angeles Magazine.

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