California Legislature Scrambles to Amend AB 5, The Independent Contractor Disaster

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Assembly Bill 5 became effective on January 1, 2020. The law purports to prevent the misclassification of employees as independent contractors by codifying the ABC test established by the California Supreme Court case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903, along with several other tests and requirements which apply to various types of business relationships. In short, the law is very confusing.  Indeed, by all accounts, AB 5 is flawed, perhaps seriously so. Several lawsuits have been filed to challenge its terms and the California legislature has scrambled to address many of the problems.  As of the bill introduction deadline, no fewer than 30 bills have been proposed, as follows:

Assembly Bills:

  • AB 1850 (Gonzalez) – a placeholder bill designed by the author of AB 5 as a method to address all necessary changes, including modifications for freelance journalists and photographers.
  • AB 1925 (Obernolte) – creates a small business exemption to the ABC test for businesses with fewer than 100 employees and with less than fifteen million in revenues on average over the last three years.
  • AB 1928 (Kiley) – would serve to repeal the ABC test and replace it with the economic realities test established by the California Supreme Court in G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 34.
  • AB 2457 (Melendez) – exempts individuals who are licensed pharmacists.
  • AB 2458 (Melendez) – exempts individuals working as physical therapists.
  • AB 2465 (Gonzalez) – modifies exemptions for barbers, estheticians, electrologists, manicurists, and cosmetologists.
  • AB 2489 (Choi) – prohibits franchisees from being deemed employees of a franchisor.
  • AB 2497 (Bigelow) – modifies exemption for transportation network companies.
  • AB 2572  (Dahle) – exempts timber operators, geologists, geophysicists, land surveyors and professional foresters.
  • AB 2793  (Mathis) – exempts licensed marriage and family therapists.
  • AB 2794 (Mathis) – exempts health facilities which contract with companies that employ health care providers who provide services to patients at those facilities.
  • AB 2796 (Fong) – makes permanent the exemption created for newspaper carriers.
  • AB 2823 (Waldron) – exempts land surveyors, landscape architects, geologists, geophysicists and construction managers or planners.
  • AB 2979 (Voepel) – exempts court interpreters and translators.
  • AB 3136 (Voepel) – exempts certified shorthand reporters.
  • AB 3185 (Lackey) – exempts referees and umpires for independent youth sports organizations.
  • AB 3281 (Brough) – modifies the business-to-business exemption.
  • ACA 19 (Kiley) – requires determination of independent contractor status based upon the Borello test by amendment of the California constitution. 

Senate Bills:

  • SB 806 (Grove) – seeks to modify the ABC test into a more flexible version. 
  • SB 867 (Bates) – makes permanent the exemption created for newspaper carriers.
  • SB 868 (Bates) – exempts freelance journalists.
  • SB 875 (Grove) – exempts court interpreters and translators.
  • SB 881 (Jones) – exempts musicians.
  • SB 963 (Morrell) – exempts referees and umpires for independent youth sports organizations.
  • SB 965 (Nielsen) – exempts health facilities which contract with companies that employ health care providers who provide services to patients at those facilities.
  • SB 966 (Nielsen) – exempts licensed pharmacists.
  • SB 967 (Borgeas) – prohibits franchisees from being deemed employees of a franchisor.
  • SB 975 (Dahle) – exempts timber operators, geologists, geophysicists, engineers, land surveyors, professional foresters and certain persons in the pest control business.
  • SB 990 (Moorlach) – exempts transportation network companies.
  • SB 1039 (Galgiani) – the most interesting proposal declares the intent of the Legislature to develop a modern policy framework that facilitates independent work for those who voluntarily choose it by creating a third classification of workers.

The above proposals make clear that AB 5 is having a substantial impact on the way we do business in California.  The final impact, however, may not be certain for several years as the legislature and, ultimately, Governor Newsom, strive to confront the many questions raised by AB 5. 

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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