California’s Assembly Bill 5, also known as AB5 or the “gig worker bill,” was signed into law by Governor Newsom on September 18, 2019. It went into effect on January 1, 2020. It addresses a worker’s employment status when a hiring entity claims that the individual it hired is an independent contractor. Below, our Los Angeles employment lawyers explain what you should know about California AB5.
What Is California’s AB5?
California’s Assembly Bill 5, or AB5, requires many companies to reclassify their independent contractors as employees. This was in particular true for “gig workers.” One of the bill’s intentions is to protect gig workers from misclassification and provide them with the same rights and benefits as regular employees.
Under AB5, a company must use a three-part test, known as the “ABC” test, to determine whether a worker is an employee or an independent contractor. The ABC test originates from California’s Supreme Court ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903. This is also known as the “Dynamex Decision.” AB5 codifies the ABC test used in the Dynamex Decision and applies it to most California businesses.
California AB5’s ABC Test
AB5 assumes that all workers are employees, unless the company can prove that the worker is an independent contractor. In order to be determined an independent contractor, the worker must meet all three of the following requirements:
- The worker is free to control and direct his or her own work performance without interference of the hiring entity;
- The worker’s duties and/or services are outside of the hiring entity’s usual course of business; and
- The worker is customarily engaged in an independently established trade, occupation or business.
Which Industries Are Affected by California AB5?
Most California businesses and industries are affected by AB5. A few examples of industries affected by AB5 include, but are not limited to:
- Franchise groups
- Referral agencies
- Professional services
- Home health care
What Does AB5 Mean for Workers?
For the workers who are reclassified as employees, AB5 entitles them to the same benefits and protections that regular employees receive. These benefits may include, but are not limited to:
- Minimum wage
- Paid sick leave
- Paid family leave
- Unemployment insurance
- Workers’ compensation insurance
- Short term disability insurance
California AB5 Exemptions
There are job category exemptions to AB5. These exemptions include, but are not limited to:
- Doctors (i.e. surgeons, dentists, podiatrists, psychologists and veterinarians)
- Private investigators
- Securities brokers
- Investment advisers
- Direct sales salespersons
- Commercial fishermen working on an American vessel
- Travel agents
- Graphic designers
- Grant writers
The list above is not exhaustive. In addition, certain requirements for each job category must be met for an exemption to apply. See the full AB5 exemptions list.
Since AB5 went into effect, other bills have also passed to provide more exemptions. Our AB5 attorneys explain these exemptions below:
What Is Assembly Bill 2257 (AB 2257) and How Does It Affect AB5?
AB 2257 was passed, effective immediately, on September 4, 2020. It provides more job category exemptions to AB5. These additional exemptions include, but are not limited to:
- Fine artists
- Freelance writers
- Illustrators and newspaper cartoonists
- Content contributors
- Copy editors
- Insurance underwriters
- Consulting services
- Animal services
- Competition judges
- Landscape architects
- Home inspectors
- Real estate appraisers
The list above is not exhaustive. Additionally, certain requirements for each job category must be met for an exemption to apply. See AB 2257 for a full list of exemptions.
What Is Prop 22 and How Does It Affect AB5?
Prop 22 was a ballot measure that passed on November 3, 2020. It declares that app-based transportation companies, such as rideshare (i.e. Uber and Lyft) and food delivery companies (i.e. Grubhub), are exempt from AB5 and its drivers are classified as independent contractors.
What If I Am Exempt from AB5?
Even if you are exempt from AB5, and the ABC test cannot be applied to you, your hiring entity generally cannot automatically label you as an independent contractor. Generally, if the ABC test does not apply, your employer must prove that you are an independent contractor by passing the Borello test.
What Is the Borello Test?
The Borello test is a multifactor test adopted from S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341. Unlike the ABC test, the Borello test considers multiple factors for worker classification. It focuses on the hiring entity’s “control of details,” or whether the entity has the right to control the manner and means by which a worker accomplishes his or her work. A few factors that it considers includes, but is not limited to:
- Whether the worker is engaged in an occupation or business distinct from the hiring entity.
- Whether the work is an integral part of the employer’s regular business.
- Whether the employer or worker supplies the instrumentalities, tools and place of work.
- Whether, considering the kind of occupation and locality, the work is usually done under the employer’s direction or by a specialist without supervision.
- Whether the service requires a special skill.
- The length of time for which the services are to be performed.
- The method of payment, whether by time or by job.
- Whether at-will employment exists.
- Whether the parties believe they are creating an employer-employee relationship.
Am I a Misclassified Worker Under AB5?
If an employer incorrectly classifies an employee as an independent contractor, the worker is deprived of benefits that the employer offers to its employees. In a lawsuit seeking to correct this misclassification, the worker can retroactively receive the value of these benefits.
If you believe that you may be misclassified, we encourage you to speak to a misclassification attorney at our firm. Contact Yadegar, Minoofar & Soleymani LLP about your unique situation. We may be able to help you. Call us at (310) 919-0091 or fill out our online contact form.