What California’s AB5 Law Means for Cleaning Service Referral

Sacramento California outside the capital building

By Anand Subbaraj

A California law known as AB5 has made national headlines in recent months after companies such as Uber and DoorDash have very publicly resisted it in the form of a November ballot initiative called Proposal 22, which would exempt them from the law.

After going into effect on January 1, 2020, AB5 has reclassified many of these companies’ gig workers from independent contractors to full-time employees. While most attention has been directed at ridesharing and food delivery, AB5 also has huge implications for referral companies in virtually every industry, including cleaning.

Here are some of the things that cleaning service providers and referral agencies alike need to know about AB5 as the conversation snowballs into a larger national discussion:

AB5 cleaning referral exemption

Under AB5, the previous test to determine whether an employee was an independent contractor—the Borello Test—has been replaced with a much stricter ABC Test. (To read more about AB5, the Borello Test, and the ABC Test, consult this State of California Department of Industrial Relations FAQ.)

However, referral agencies can be exempted from the ABC Test if they connect customers with service providers in several different industries. One of these industries is home cleaning services. Referral agencies in home cleaning services must still meet 10 very specific criteria to be exempted from the ABC Test. Most of these criteria simply establish that the cleaning service provider is, in fact, independent from the referral agency in terms of branding, clientele acquisition, tools used, etc. Many referral agencies already meet most of these criteria.

Then why does it matter: Price transparency

Out of the 10 criteria, there is one that will require both referral agencies and service providers alike to redesign how they promote their services online so as to maintain the ABC exemption.

Section (I) states, “The service provider sets its own rates for services performed, without deduction by the referral agency.”

For most cleaning services referral agencies, their websites or apps are designed without specific rates for individual cleaning services listed. Rather, they list a standardized price for certain types of tasks, regardless of the specific rates that their nominally independent cleaning service providers offer individually.

For example, if you were to search many cleaning referral sites today, you would enter your zip code and certain details about the task such as how many rooms needed to be cleaned. Then the referral agency would give you a flat rate without allowing you to explore specific cleaning providers to choose the cheapest option. Think of this as the difference between going onto AirBnB and browsing locations listed by the rates set by their owners versus just getting a pre-set price from AirBnB, depending on location and type of apartment, house, etc. requested.

So, what’s next?

Pricing control has historically been in the hands of referral agencies, but AB5 is giving back pricing control to service providers, at least in California. While this will add price transparency and freedom of choice for customers, if referral agencies want to keep their cleaning service providers listed as independent contractors, they will need to completely redesign how they match them with potential clients.

This all leads to ensuring the best possible customer experience. Above and beyond any new laws or regulations, it’s a superior customer experience that differentiates companies that operate in a commodity business like cleaning services. This means drawing customers in with well-designed profiles for individual cleaning service providers, clearly marked customer ratings and prices, and the ability for customers to sort providers according to what is important to them.

By placing the customer at the center of the redesign, referral agencies can create a competitive advantage and drive customer loyalty for years to come for both the agencies and cleaners.

Anand Subbaraj is the CEO of Zuper, provider of a leading intelligent workforce management platform for service businesses such as residential and commercial cleaning, HVAC, electrical, internet service providers, plumbing, and landscaping. Subbaraj is a seasoned product leader with over 17 years of experience in technology and 13 years at Microsoft, specializing in the areas of big data, business intelligence and analytics, cloud computing, digital transformation, and SaaS.

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