California Worker Classification Changed Significantly By AB 5

With the California Governor's approval of Assembly Bill No. 5 on September 18, 2019, worker classification law in the state has changed significantly by codifying the "ABC" test established in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal.5th 903 (2018). A person who provides labor or services for remuneration is now presumed to be an employee for purposes of claims for wages and benefits, unless the hiring entity can demonstrate that:

  1. The person is free from the control and direction of the hiring entity in connection with the performance of the work;
  2. The person performs work that is outside the usual course of the hiring entity's business; and
  3. The person is customarily engaged in an independently established trade, occupation, or business.

Certain occupations are exempt from the application of Dynamex under AB 5, including licensed insurance agents, direct sales salespersons, real estate licensees, workers providing licensed barber or cosmetology services, and others. Worker classification in these exempt occupations will be determined by the rules of S. G. Borello & Sons, Inc. v. Dep't of Indus. Relations, 48 Cal. 3d 341 (1989).

We first discussed the implications of each worker classification method here. You can read the full text of AB 5 here.

If your business relies on independent contractors, you may want to consider having your practices reviewed in light of the recent changes to worker classification in California. Contact our firm today to talk to an attorney.

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