How California’s AB5 is changing employment law

Of all the landmark changes to California employment law that occurred in 2019, one of the most significant affects how a business can classify the workers it hires. In order to avoid the state’s basic wage and benefit laws, some businesses have attempted to label their workers as independent contractors rather than employees, triggering a number of recent lawsuits.

Assembly Bill 5 (AB5) codifies the landmark California Supreme Court case, Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamix), which created a presumption that any hired worker is classified as an employee and therefore enjoys basic labor protections under the state’s labor laws, unless proved otherwise. These protections guarantee minimum wage, sick leave, unemployment and worker’s compensation benefits.

The California Supreme Court ruling established an ABC test to assess if a worker has been misclassified, and also gave the burden of proving it to the employer. AB5 clarifies and expands the scope of this case’s three-prong test. For a worker to be classified as an independent contractor, the employer must show that:

  • The person is free from the control and direction of the hiring entity in connection with the performance of the work
  • The person performs this work outside of the usual course of the hiring entity’s business
  • The person is typically engaged in an independent, established trade, business or occupation

The gig economy and its employers

After California’s Labor Commissioner sued Uber and Lyft for misclassifying its drivers as independent contractors and thereby committing wage theft this year, both companies threatened to leave the state. On the November ballot, the voters guaranteed the passage of Proposition 22 by a large margin, splitting the differences between the two opposing sides.

Under the new measure, Uber and Lyft do not have to classify their workers as employees, but will have to offer them basic benefits such as minimum hourly wages. This measure was opposed by labor groups.

While California has some of the most robust labor laws in the country, an employee who does not know what these laws protect or guarantee may find himself misclassified, underpaid or wrongfully terminated. If you are in a conflict with your employer and think that you deserve compensation for lost wages or damages, it is important to find an experienced labor attorney who knows current law and will fight for your rights.