AB-5 (The Law Eviscerating California Employers’ Ability To Hire Contractors) Is Still Alive And Well

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Fox Rothschild LLPIf you were hoping that AB-5 (the CA statute codifying the ABC standard into widespread law) would be held invalid, enjoined, or would just fall off a cliff, it is time to face reality.  AB-5 is alive and well, and effective January 1, 2020.  That means any California employer who still relies on independent contractors as part of its workforce should be hustling to address that issue if they haven’t already.

Yes, some gig economy companies are planning a ballot initiative, but that won’t be on the ballot until November 2020.

And there is a glimmer of hope for truck drivers, given that motor carriers and individual owner-operator truck drivers filed a motion for preliminary injunction to cease enforcement of AB-5 as to just them; that case is set for hearing on December 30, 2019 in USDC, Southern District.

But everyone else doing business in California are left with limited options, including:

  • Full compliance which may include:
    • Converting workers to employees
    • Taking steps to ensure that all contractors meet one of the funky enumerated exemptions and have an updated contractor agreement
    • Retaining a reputable staffing company to employ workers (especially for businesses that are not set up to do a proper payroll and handle the myriad of legal requirements necessary for employees
  • Taking the risk of misclassification and hoping your business won’t be a target
    • Note, if you have had any union activity, watch out – you are likely on the target list!
  • One of the first two options, along with a lobbying strategy to try to get your business listed as another exemption

My franchise partner, Tami McKnew, and I have been presenting a series of webinars on AB-5 and its impact on the franchise system.  Notably, there is no exemption in AB-5 for franchisees.  Also notably, many franchisees are women or minority owned, and actually like the freedom to be self-employed.  In fact, 35% of franchise owners are women.  So one of the points Tami and I have been stressing, is that if you are a franchise owner in California, and you’d like to retain that status, then contact your legislators and tell them!  The voices of business owners can hold a lot of weight. Indeed,  Assembly Member Gonzalez, AB-5’s author, appears open to such efforts come January (as she was before the bill passed), but only time will tell if any will be successful.

In the meantime, one thing is for sure.  AB-5 will keep us employment lawyers busy in the coming year.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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