California Assembly Bill 5 Approved

California Bill

The California Senate Labor, Public Employment, and Retirement Committee passed a bill Wednesday that would likely result in a variety of industries, including gig economy companies, to classify individuals in their business as employees rather than independent contractors.

Assembly Bill 5, introduced in January by Rep. Lorena Gonzalez, codifies and expands a landmark state supreme court ruling from last May, Dynamex v. Superior Court, which wrestled with the same employment classification issue. In determining whether a worker is a true independent contractor (as Uber, Lyft, and other “gig economy” platforms contend) or employees, there are a number of legal tests that, in simple terms, suss out whether the laborer has sufficient say in how and when the work is completed. California’s supreme court, in applying the broader “ABC test,” decided contract drivers working for delivery firm Dynamex were improperly classified—opening the door for gig workers across the state to challenge their own statues.

Independent contractors are a staple of California’s massive economy: According to a study cited in the bill’s analysis, the number of independent workers jumped 30% from 2005 to 2015. In addition to ride-hail drivers, truck drivers, freelance writers, software developers and musicians often work on independent contracts.
Since introducing it last December, Gonzalez has amended the bill to exempt professions such as insurance brokers, licensed doctors, financial advisers, salespeople, cosmetologists, lawyers and other professional services.
Direct sellers were included in the first list of exemptions under the bill.
Notably absent from the list are ride-hail drivers. Uber and Lyft’s CEOs are holding out hope that Gonzalez will add ride-hail employees to her growing list of exemptions. They said in an op-ed last month that classifying drivers as employees would ruin the flexibility that allows drivers to work whenever they want. The companies claimed to be open to offering drivers vacation time and other benefits if they are allowed to continue classifying drivers as contractors.
With Wednesday’s result, AB 5 advances to the Senate Appropriations Committee ahead of a potential floor vote.  If all goes well, Rep. Gonzalez’s team expects the law to go into effect January 1, 2020.
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