Important: New Requirement for Independent Contractors in California
KHM Travel Group’s Independent Contractor Agreement states that all independent contractors agree to be fully responsible for complying with all federal, state, and local laws.
As part of California law, effective July 1, 2020, all travel advisors residing in the state of California must obtain a business license or be operating as a Limited Liability Corporation (LLC).
In order to continue your membership with KHM Travel Group and remain compliant with the requirements set forth in the Independent Contractor Agreement, you will be asked to acknowledge that you agree to follow all laws for the city, county, and state in which you reside.
Below you will find the detailed requirements as provided to KHM Travel Group by the California Coalition of Travel Organizations (CCTO). We’ve also gathered online resources that explain the process for obtaining a business license.
NOTE: Any information and resources provided are intended for educational use only. It is always recommended that you speak to an attorney for full and accurate details regarding your business. As a reminder, KHM Travel Group offers you an exclusive discount on LegalShield and IDShield services. You can learn more about these services in MyTravelAgentPortal.
Information from California Coalition of Travel Organizations (CCTO):
AB 5 [Gonzalez, Chapter 296, Statutes of 2019] took effect on January 1 and placed into law – with revisions – the California Supreme Court’s Dynamex decision with the “ABC” criteria for the determination of a worker’s status as either an employee or independent contractor.
Travel advisors should be aware of the specific “travel agent” provision that CCTO, ASTA and member organizations obtained in this new law. Travel advisors desiring to take advantage of this provision should make sure they have a business license prior to July 1.
Here is an excerpt from the law that sets forth this obligation:
1. A contractor shall be governed by Borello if the hiring entity demonstrates that all of the following factors are satisfied:
(A) The individual maintains a business location, which may include the individual’s residence, that is separate from the hiring entity. Nothing in this subdivision prohibits an individual from choosing to perform services at the location of the hiring entity.
(B) If work is performed more than six months after the effective date of this section, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession.
(C) The individual has the ability to set or negotiate their own rates for the services performed.
(D) Outside of project completion dates and reasonable business hours, the individual has the ability to set the individual’s own hours.
(E) The individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work.
(F) The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.
2. For purposes of this subdivision:
(A) An “individual” includes an individual providing services through a sole proprietorship or other business entity.
(B) “Professional services” means services that meet any of the following: (iii) Travel agent services provided by either of the following: (I) a person regulated by the Attorney General under Article 2.6 (commencing with Section 17550) of Chapter 1 of Part 3 of Division 7 of the Business and Professions Code, or (II) an individual who is a seller of travel within the meaning of subdivision (a) of Section 17550.1 of the Business and Professions Code and who is exempt from the registration under subdivision (g) of Section 17550.20 of the Business and Professions Code.
Reference: Labor Code Section 2570.3, subdivision (c).
Travel advisers should also keep in mind the provisions of the Seller of Travel law that set forth the exception for independent travel advisers, especially the following:
(g) This section does not apply to a person who is an individual, a single-member limited liability company whose sole member is an individual, or a single-shareholder “S” corporation whose sole shareholder is an individual, that meets all of the following:
(1) Has a written contract with a registered seller of travel to act on that registered seller of travel’s behalf in offering or selling air or sea transportation and other travel goods or services in connection with the transportation.
(2) Acts only on behalf of a registered seller of travel with whom the person has a written contract in the offer or sale to a passenger of air or sea transportation and other goods or services in connection with the transportation and sells no other air or sea transportation or travel services to that passenger.
(3) Provides air or sea transportation or travel services that are offered or sold pursuant to the official agency appointment of the registered seller of travel with whom the person has a written contract.
(4) Does not receive any consideration for air or sea transportation or other travel services from the passenger.
(5) Requires the passenger to pay all consideration for air or sea transportation or other travel services directly to the air carrier or ocean carrier or to the registered seller of travel.
(6) Discloses both of the following:
(A) The person is acting on behalf of a registered seller of travel.
(B) The name, address, telephone number, and registration number of the registered seller of travel on whose behalf the person is acting.
The person shall make the disclosures required by this paragraph in writing to the passenger at the same time the passenger receives notice under Section 17550.13. If the person transacts business in this state on the Internet, the disclosures also shall appear on the home page of the person’s Internet Web site and shall be prominently set forth in the first electronic mail message sent to the passenger that refers to the passenger’s purchase of air or sea transportation or travel services.
Whenever the Attorney General determines that a registration application is accurate and complete, the application shall be processed and a registration certificate shall be issued to the seller of travel within 21 days.
Reference: Business and Professions Code Section 17550.20, subdivision (g)
- California Governor’s Office of Business and Economic Development: http://www.calgold.ca.gov/
- California Department of Consumer Affairs: https://www.dca.ca.gov/
- How to Get a Business License in California: https://www.wikihow.com/Get-a-Business-License-in-California
- LegalShield and IDShield Services: https://mytravelagentportal.com/dashboard/compliance/setting-up-your-business/recommended-business-services/legalshield-and-idshield-discounted-plans/