Pre-AB 5: The ABC Test Has Been California’s Test Since April 2018
The real sea change occurred over a year ago in April 2018, when in a significant decision the Supreme Court of California changed the state’s legal test for determining whether a worker is properly classified as independent contractor rather than employee. The court replaced the Borello test, which had been in effect since 1989, with the ABC test, which the court borrowed (like a cup of sugar) from the state of Massachusetts. But the short story is that the ABC test will likely make it significantly more difficult for a worker to qualify as an independent contractor.
AB 5, if signed by Governor Gavin Newsom, will add the ABC test to the California Labor Code. But the ABC test has been the legal test in California since April 2018.
So, how might AB 5 change the legal landscape in California with respect to classifying workers as independent contractors?
AB 5 Significantly Reduces the Number of Workers Subject to the ABC Test
First, the most significant (and underreported) change under AB 5 will be to significantly reduce the number and types of workers who would otherwise be subject to the ABC test under the Supreme Court of California’s 2018 decision.
As previously discussed, AB 5 exempts a long list of occupations and types of service providers from the ABC test. The old Borello test will continue to apply to these exempted workers. Without the exemptions provided by AB 5, the new test established by the Supreme Court of California would apply to every independent contractor in California, from barbers to doctors to investment advisers to manicurists.
AB 5 Expands the Claims Subject to the ABC Test
Second, AB 5 will expand the types of legal claims to which the ABC test will be applicable.
California’s employers must comply with both the Labor Code and Industrial Welfare Commission’s wage orders, which govern the wages, hours, and working conditions in certain industries or occupations.
On its face, the holding in the Supreme Court of California’s 2018 decision limited the ABC test to claims under California’s wage orders. For example, under the court’s decision, the ABC test would apply to claims under the wage orders for overtime pay as well as meal and rest period premium pay by a worker who alleges misclassification as an independent contractor.
Read the full story at How Much Will AB 5 Really Change California Law?