September 19, 2019

CA Gov. Newsom Signs Assembly Bill 5

As previously stated in Spotlight, the California legislature has passed Assembly Bill (AB) 5, which codifies and expands on the “ABC” test for determining whether a worker should be classified as an employee or an independent contractor. Yesterday, September 18th, California Governor Gavin Newsom signed AB 5, requiring employers to reclassify certain workers who are classified as independent contractors to employees, who are entitled to certain benefits and protections.

The ABC test was adopted by the California Supreme Court’s Dynamex decision in 2018. In Dynamex, the California Supreme Court held that under this ABC test, workers are presumed to be employees unless all three of the following conditions are met:

(A) The individual is free from control and direction in connection with the performance of the service, both under his contract for the performance of service and in fact; and

(B) The service is performed outside the usual course of the business of the employer; and

(C) The individual is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the service performed.

Under AB 5, the ABC Test is applied to all the provisions of the Labor Code and Unemployment Insurance Code as well. Whether the ABC test would be used under the Workers’ Compensation and Insurance Codes has been deferred by the legislature for future consideration. And while the bill creates several exemptions for certain classes of workers, agriculture is not included.