On September 18, 2019, California Governor Gavin Newsom signed into law A.B. 5, codifying a tighter standard of rules for classifying a worker as an independent contractor. The new standard, known as the Dynamex standard, codifies and expands the earlier California Supreme Court decision, Dynamex Operations West, Inc. v. Superior Court of Los Angeles. It replaces the former Borello test, and puts in place a more simple three-pronged ABC test. The significant effect is that many workers in California will now be classified as employees instead of independent contractors (also informally known as “1099” workers). This change is one of the most significant disruptions to California employment law in decades. The law has now gone into effect as of January 1, 2020.
The new law is convoluted, and has numerous exceptions for various professions, as discussed in further detail below. To further complicate matters, the law codifies Dynamex for purposes of claims made under the California Labor Code, Unemployment Insurance Code, and wage orders, but curiously does not mention the California Government Code, under which workers may seek redress for harassment and discrimination, among other things.
In addition, the newly created exemptions to the ABC test will apply “retroactively to existing claims and actions to the maximum extent permitted by law.”
In order to ensure that your company’s workers are properly classified (in order to avoid substantial fines and expensive misclassification lawsuits), contact a qualified employment law attorney as soon as possible to ensure you are complying with the law and following the new rules.
What Is the Potential Impact of This Change?
According to the LA Times, “State Capitol Democrats and organized labor say their new ‘gig’ law will correct the misclassification of 1 million California workers who are falsely deemed independent contractors.”Continue reading