California’s 2018 Dynamex decision (known for the “ABC Test” to determine if workers are employees or independent contractors) was signed into law this past August. The California Assembly Bill 5 (AB 5) will go into effect January 1, 2020.
Broadly speaking, the bill limits businesses’ ability to classify workers as independent contractors, by using the strict, three-part ABC test for determining whether workers are employees or independent contractors. The ABC test allows for the classification of independent contractors only if employers can verify:
(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; and
(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
There is a lot of controversy and confusion around the bill and what impact it actually has, since the ABC Test is already in place via case law. There is strong opposition and lawsuits are expected, especially from ride share services, but also other industries such as construction and janitorial services. The bill does include some exemptions for certain positions, such as doctors, real estate agents, and insurance brokers.
Questions about compliance?
At eBacon, we make sure our clients and our services are always up to date on the latest laws that could affect employers. Reach out to us today for a free consultation to see how you can stay compliant and save money.
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.