Effective January 1, 2020, Assembly Bill 5 (“AB5”) dictates which California workers must receive full employment benefits. This new law has shown to be a continuously hot topic, as battles over employee classification persist in court.

On one side we have groups seeking to roll back the law.  These include truck drivers, who argue that AB5 is interfering with their ability to earn a living as independent contractors. On the other side are labor advocates like Assemblywoman Lorena Gonzalez.  Gonzalez is the author of the bill and believe in financial security for gig economy workers and others.

In addition to reclassifying many independent contractors as employees, AB5 empowers California’s attorney general and city attorneys from the four biggest cities (San Diego, San Francisco, San Jose, and LA) to enforce compliance among California businesses. In fact, Gonzalez publicly encourages them to file injunctions against businesses.  She believes legal action will be more effective in enforcing compliance.  Particularly after Uber asserted that they will not change its worker classification practices.

Who is an “employee”?

AB5 codifies the 2018 landmark decision in the Dynamex case (Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903). It creates a set of rules (“ABC” Test) for when a worker must be classified as an employee instead of an independent contractor. A key part of AB5 states that workers can only be classified as employees if they do work that is “integral” to a company’s business.

Now that AB5 has gone into effect, many employers have been taking steps to comply with the law. Some have converted their independent contractors to employees (who are then entitled to benefits).  Others have changed their practices to ensure the legal classification of their workers as independent contractors. But remember, it’s not a choice – it’s a legal determination on how to properly classify them!

On the other hand, companies like Uber have asserted that they don’t plan to make changes to comply with the law. Uber has made changes to the app in response to AB5 but refuses to reclassify its workers. They claim that their workers are still correctly classified as independent contractors.

Who is exempt?

Dozens of professions were granted exemptions from AB5, including lawyers and doctors, but in doing so, AB5 has alienated other industries that have not received this exemption, like Uber and the gig industry. As such, many professions express their concerns and push for additional flexibility, temporary changes and adjustments are being made to AB5. For example, lawmakers granted newspaper companies a 1-year reprieve in their classification of newspaper delivery workers as independent contractors.

If you are a business in need of assistance with matters regarding employee classification and AB5 compliance, please contact Hackler Flynn and Associates.   AB5 is a legal determination on how to properly classify an employee.  The default presumption of AB5 is most workers are employees.

DISCLAIMER: Content within this post should not be considered legal advice and is for informational purposes only. Communications made through this post do not create an attorney-client relationship. Hackler Flynn & Associates is not responsible for any content that you may access from third-party resources that may be accessed through or linked to this post. Hackler Flynn & Associates is only licensed to practice in California.

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