California’s AB 5 Curtails Use of Independent Contractors
On Tuesday, September 10, 2019, California lawmakers passed AB 5, which codifies Dynamex v. Superior Court (“Dynamex”) the California Supreme Court decision that established new legal standards in determining whether a worker is an employee or an independent contractor. Under Dynamex’s ABC test, a person is presumed an employee rather than an independent contractor unless the hiring entity demonstrates that (a) the person is free from the control and direction of the hiring entity in connection with the performance of the work, (b) the person performs work that is outside the usual course of the hiring entity’s business, and (c) the person is customarily engaged in an independently established trade, occupation, or business. Governor Newsom signed the bill to law on September 18, 2019.
Maier Law Group founding partner, Diana Maier, was interviewed by NBC news about the impact of this law on consumers and the so called “gig” economy (watch the video clip here).
The most interesting thing about AB 5 is that it expands Dynamex which only applied to Industrial Welfare Commission’s Wage Orders governing minimum wages, overtime, and meal and rest breaks. AB 5, on the other hand, covers both the Labor Code and the Unemployment Insurance Code. Yet, due to some intense lobbying from special interests, AB 5 also establishes certain occupational exemptions (e.g. lawyers, doctors, architects, etc.) that Dynamex did not contain. The exempt occupations will remain subject to the original common law standard set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal.3d 341 (1989) which is a murkier and, arguably, easier test to pass than the ABC test.
As always please contact Maier Law Group if you’re unsure about whether you’re properly classifying independent contractors. State and federal government agencies continue to aggressively audit and penalize most any businesses that classifies regular workers as independent contractors. You may use this contact form or email us in more detail at info@maierlawgroup.com.
The Maier Law Group helps companies ensure that their policies and practices comply with the relevant workplace regulations. Please contact us at info@maierlawgroup.com for more information.
This article has been prepared for general informational purposes only and does not constitute advertising, solicitation, or legal advice. If you have questions about a particular matter, please contact the Maier Law Group directly.