California AB 5: Classifying Employee or Independent Contractor

California

From The National Law Review, Chris M. Micheli provides an outstanding review of California’s recently enacted AB5 which adopts the ABC test for most workers and outlines a number of exceptions. Chris provides a through review of the new law and also shares letters from the legislator who introduced the bill and the governor. Chris writes:

Author’s Letter to the Journal

Assembly Member Gonzalez submitted a letter to the Assembly Daily Journal expressing her intent regarding AB 5. This letter is set forth below:

Dear Mr. Wilson:

I am writing to clarify the intent of Ab 5. The fundamental purpose of AB 5 is to codify the California Supreme Court’s unanimous decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex) and clarify the decision’s application in state law. Additionally, AB 5 provides that, for specified occupations and situations, the applicable test for determining if an individual is an employee or an independent contractor is the test set forth in the California Supreme Court decision in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello) or relevant statute.

It is not the intent of AB 5 to distinguish between “platform” and “brick and mortar” businesses. Both types of businesses rely on individuals to perform work as part of the usual course of business.

One of the provisions of AB 5 addresses business-to-business contracting. Specifically, Subdivision (e) of Section 2750.3 provides that the holding in Dynamex and subdivision (a) of Section 2750.3 do not apply to a bona fide business-to-business contracting relationship if certain criteria are satisfied and, instead the determination of employee or independent contractor status of the business services provider is governed by Borello. Importantly, while this provision exempts certain bona fide business-to-business contracting relationships from the holding in Dynamex if the criteria are satisfied, subdivision (e) is not intended to suggest, by negative implication, that the business service provider is necessarily an employee if those criteria are not satisfied.

Additionally, AB 5 is not intended to replace, alter, or change joint employer liability between two businesses. AB 5 is focused upon the determination whether an individual is an employee or an independent contractor.

It is the intent of AB 5 that subdivision (a) of the bill and the holding in Dynamex do not apply to a physician and surgeon, dentist, podiatrist, psychologist or veterinarian (Licensees), but that the holding in Borello applies to the Licensees. The September 6, 2019 amendments to AB 5 include language in Section 2750.3(b)92) stating that Dynamex shall apply to Licensees in some limited instances. The intent of AB 5 is to apply Dynamex to current or potential collective bargaining agreements in settings that allow for the employment of these licensees. The version of AB 5 amended September 6, 2019 has language in Section 2750.3(b)(2) that fails to capture the intent of the author due to a drafting error and erroneously applies Dynamex to employment settings and not collective bargaining agreements. The language as of September 6, 2019 is not accurate. It is my intent to fix this drafting error by introducing a bill to amend Labor Code Section 2750.3(b)(2).

In an effort to provide as much certainty as possible moving forward, I am committed to working collaboratively with the labor and business communities to develop additional language regarding the applicability of Dynamex in 2020 and to pursue legislation that further clarifies the law.

Thank you for this opportunity to clarify the intent of AB 5.

Sincerely,
Lorena Gonzalez
Assemblywoman, 80th District

Signing Message

When Governor Newsom signed AB 5 into law on September 18, he included a signing message, which reads as follows:

To Members of the California Assembly:

Assembly Bill 5 is landmark legislation for workers and our economy. It will help reduce worker misclassification – workers being wrongly classified as “independent contractors,” rather than employees, which erodes basic worker protections like the minimum wage, paid sick days, and health insurance benefits.

The hollowing of our middle-class has been 40 years in the making, and the need to create lasting economic security for our workforce demands action. Assembly Bill 5 is an important step. A next step is creating pathways for more workers to form a union, collectively bargain to earn more, and have a stronger voice at work – all while preserving flexibility and innovation.

In this spirit, I will convene leaders from the Legislature, the labor movement and the business community to support innovation and a more inclusive economy by stepping in where the federal government has fallen short and granting workers excluded from the National Labor Relations Act the right to organize and collectively bargain.

Sincerely,
Gavin Newsom
Governor

Read the full story at California AB 5: Classifying Employee or Independent Contractor

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