Featured Article
Classifying Independent Contractor Status Under Assembly Bill 5 “I Need To Know Where This Relationship Is Going…”
California has some of the most burdensome employment laws in the nation, most of which favor employees over employers. As a result, California
businesses are typically eager to avoid the application of the state’s employment laws entirely by classifying workers as independent contractors rather than employees. Unfortunately, the passage of AB 5, effective on January 1, 2020, makes this practice a risky proposition. On September 18, 2019, Governor Newsom signed AB 5, codifying and expanding the pro-employment “ABC test” for independent contractor classifications, first outlined in the Supreme Court’s 2018 decision in Dynamex Operations West, Inc. v. Superior Court. His signature makes the ABC test a fixture of the California Labor Code (adding Section 2750.3), Unemployment Insurance Code
8 | ConejoView
SPRING 2020
(amending Section 3351) and the California Industrial Commission Wage Orders. With the passage of AB 5, all companies using independent contractors now face an increased risk of misclassification claims by workers and government agencies. AB 5 is not all bad news, however, as it creates exceptions to the application of the ABC test for a limited number of professions and specific types of contractual relationships. It is important to note that these limited exceptions, where applicable, do not mean that the worker is an independent contractor. Rather, working relationships exempted from the ABC test must then apply the former “control” test outlined in the Borello case. The ABC test, codified in AB 5, provides that a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor, unless the hiring entity demonstrates that all of the following conditions are satisfied:
By: Karen L. Gabler, Esq.
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and (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 of the same nature as that involved in the work performed. Under the ABC test, the worker in question is “presumed” to be an employee unless the hiring entity can prove all three prongs of the ABC test.
EXCEPTIONS TO THE ABC TEST Despite the significant burden of the ABC test, AB 5 does carve out limited exceptions for certain professional oc-
