The Debate Continues: California's Legislative Response To Worker Classifications
A major debate remains among employers and workers regarding appropriate classifications in response to the California Supreme Court ruling in the case of Dynamex Operations West Inc. v. Superior Court of Los Angeles County.
To recap, Dynamex created a presumption that a worker who performs services for hire is an employee for the purpose of claims for wages and benefits. It further provides for a three-prong test, commonly known as the "ABC" test, to help classify workers as independent contractors or employees. Despite the Court's ruling, there is still controversy over the applicability and the reach of this interpretation of the law.
In response to the ruling and the classification debate, Assemblymember Lorena Gonzalez (D-San Diego) introduced Assembly Bill (AB) 5 in December 2018. This groundbreaking labor bill would, if passed, clarify and provide certainty to employers and workers alike. The essential purpose of this bill would codify the "ABC" test to determine who's an independent contractor and who is an employee, leaving no room for uncertainty. Further, if passed this bill is set to redefine what it truly means to be an employee in the state of California, extending labor protections and benefits such as healthcare, overtime and minimum wage to many workers who would have been labeled as independent contractors.
By codifying the "ABC" test, AB 5 provides all businesses with an easy-to-comply-with evaluation process. It also makes it clear that a number of professions are not covered under AB 5, such as doctors, lawyers, architects, insurance agents, accountants, engineers, financial advisors, real estate agents, and hairstylists who rent stations at salons. The language appears to respect the workers who want to remain their own boss and isn't forcing them to change their way of life. The true heart and purpose of the bill is to give working people in California who are most likely to be exploited some dignity and respect for the work they perform.
The bill passed the state Assembly in June and is now headed to the California Senate for a vote at the end of the summer. We expect it to be on the Governor's desk before the end of the year and will keep you apprised of any further updates.