Governor Signs Into Law Immediate Changes to Paid Sick Leave Requirements and AB5 Exemptions

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The majority of the employment-related bills that Governor Newsom will sign this year will not take effect until January 2021 or later. But Governor Newsom signed two significant, employment-related “trailer bills” this week that took effect immediately.

AB 1867 – Paid Sick Leave for Employees Exposed to or Testing Positive for COVID-19

At the outset of the current pandemic, the state of California, through an executive order of the governor, required employers to provide paid sick leave protection to workers in the food sector. And under the federal Emergency Paid Sick Leave Act contained in the Families First Coronavirus Response Act (FFCRA), employers with fewer than 500 employees must provide their employees with 80 hours of paid sick leave at the employee’s regular rate, subject to a cap. Accordingly, with the exception of workers in the food sector industry, employers in California with 500 or more employees have not, until now, been required to provide paid sick leave for COVID-19 purposes.

AB 1867 has closed that gap. Under the new law, private employers with 500 or more employees (as well as any entity, including public entities, that employ health care workers or emergency first responders) are now required to provide up to 80 hours of paid sick leave to any worker who is: (a) subject to a federal, state, or local quarantine or isolation order related to COVID-19; (b) advised by a health care provider to self-quarantine or self-isolate due to COVID-19 concerns; or (c) prohibited from working due to health concerns related to COVID-19 transmission. The paid sick leave must be made available immediately upon any request (including an oral request) from the employee. Part-time employees are eligible to receive paid sick leave in the amount they are scheduled to work over a two-week period. The leave requirement is subject to the same cap provided in the FFCRA ($511 per day, $5,110 total).

AB 1867 became effective immediately upon the Governor’s signature on September 9, 2020.

AB 2257 – Expands & Clarifies AB 5 Exemptions

AB 2257 represents a substantial revision to California’s independent contractor laws. Under AB 5, which became law last year, the standard for determining whether a worker may properly be classified as an independent contract became the “ABC test.” Specifically, a worker subject to the ABC test may only be classified as an independent contractor if: (a) the worker is free from the control and direction of the hiring entity in connection with performing the work, both under contract and in fact; (b) the worker performs work that is outside the usual course of the hiring entity’s business; and (c) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work he or she performs for the hiring entity. AB 5 also contained numerous statutory exemptions from the ABC test. Provided certain criteria were met, the status of independent contractors in an occupation covered by one of these exemptions was determined by the Borello common law test, a more flexible standard than the ABC test.

AB 2257 maintains the essential framework of AB 5, but sets forth several new statutory exemptions from the ABC test, which apply retroactively where applicable. In addition, some existing exemptions have been altered in significant ways.

First, AB 2257 maintains the exemption for “bona fide business-to-business contracting relationships” in instances where a contractor “acting as a sole proprietor, or a business entity formed as a partnership, limited liability company, limited liability partnership or corporation contracts to provide services to another such business.” The exemption now also applies where a “public agency or quasi-public corporation” has retained a contractor to perform services. The bill also adds an exemption for “single-engagement” business-to-business interactions. Subject to certain requirements, the ABC test will not apply where one individual contracts with another to perform services at “a stand-alone non-recurring event in a single location, or a series of events in the same location no more than once a week.”

The bill also expands the exemption that applies in the context of a relationship between a sole proprietor or business entity on the one hand, and a referral agency on the other, which refers the sole proprietor or business entity’s services to clients. AB 2257 expressly applies the exemption to a non-exclusive list of additional services, including consulting, youth sports coaching, event planning, and interpreting services.  

Finally, the bill adds exemptions for certain types of services: Animal services including dog groomers and walkers; caddies; competition judges; consultants; feedback aggregators; furniture assemblers; graphic designers; handypersons; home inspectors; insurance underwriters; interpreters; licensed landscape architects; manufactured housing salespersons; movers; musicians; people engaged by an international exchange visitor program; performance artists; photo editors; photojournalists; pool cleaners; real estate appraisers; registered professional foresters; specialized performers teaching master classes; still photographers; translators; tutors; videographers; web designers; wedding and event planners and vendors; workers who run errands; and youth sports coaches.

AB 2257 does not include exemptions for a number of industries that have engaged in extensive lobbying efforts, such as gig economy companies, trucking, and the motion picture and television industries.  

AB 2257 is effective immediately. Businesses should do a comprehensive review of all workers currently classified as independent contractors to determine if that classification still fits, and review business-to-business and referral agency relationships in accordance with these new requirements.  

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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