California’s Assembly Bill 5 (AB5), which took effect on January 1, 2020, reclassified certain types of gig workers as employees rather than independent contractors, affecting hundreds of thousands of workers, including Uber and Lyft drivers and other service professionals.
What This Means for Workers and Employers
The bill uses a three-part standard, known as the ‘ABC test,’ to determine whether a worker is a contractor or an employee. To be classified as an independent contractor, a worker must be free from a company’s control, do work that is not central to the company’s business, and have an independent business in the trade.
The bill’s author, Assemblywoman Lorena Gonzalez, a Democrat from San Diego, said companies often classify workers as independent contractors to dodge providing them minimum wage, overtime, workers’ compensation, disability, and other benefits.
Gonzalez and proponents of this bill believe the law will provide workers with basic job protections. The bill, which went into effect on January 1, 2020, responds to calls for increased legal protections for ‘gig workers’ and others who make a living through flexible, temporary, and freelance working arrangements.
So far, the bill exempts doctors, dentists, lawyers, architects, accountants, engineers, insurance brokers, investment advisers, real estate agents, direct sellers, licensed hairstylists who set their own rates and schedules, and marketers and human-resources professionals who meet specific professional services exemption criteria such as maintaining a separate business location and serving multiple clients.
Business lobbyists are seeking additional exemptions, including for Uber and Lyft drivers, freelance writers, graphic designers, and other job categories.
Understanding the ABC Test
So, what makes a worker an employee? Under this bill, California’s ABC test requires that a worker satisfy three independent conditions before they can be classified as an independent contractor, and if any single prong fails, the worker is an employee by default. A worker is an independent contractor only if all three of the following apply:
- Control: The employer does not dictate how the worker completes the work.
- Scope: The work is in a field different from the hiring company’s business.
- Independence: The worker runs a business doing the same kind of work for the hiring company.
Impact on California’s Employment Landscape
Our California employment attorneys closely monitor this law, which has significantly changed California’s employment landscape. Employees are entitled to certain rights and benefits, including minimum wage, overtime pay, paid sick/family leave, unemployment insurance, and disability insurance, while independent contractors do not enjoy these same labor protections.
This is a much-needed law in California, where the ‘gig economy’ has become dominant. While temporary jobs provide workers autonomy because they can choose when and how they want to work, they also impact the benefits and wages they receive. Many gig workers miss out on crucial benefits such as healthcare.
Our law firm has pursued several large companies that have misclassified full-time employees as contractors to avoid paying them their due wages and benefits. If you believe you have been misclassified as an independent contractor when you should be classified as an employee, California employment attorneys can help you understand your rights and pursue the benefits you deserve. Proper enforcement and compliance remain essential to protecting worker rights under AB5.
Source: https://www.sfchronicle.com/business/article/California-Assembly-passes-gig-work-bill-13904777.php
Ian Silvers
Ian Silvers is a partner and trial lawyer at Bisnar Chase, specializing in wage and hour class action cases for workers and other employee rights in California.