Potente, Business Lawyer and Company Formation

On Wednesday, May 29, 2019, the California State Assembly passed AB-5, a bill that impacts the classification of workers, making it more difficult for companies to classify workers as independent contractors instead of employees.

The bill instructs businesses to determine worker classification by using the “ABC test” from the 2018 California Supreme Court decision in Dynamex West Operations, Inc. v. Superior Court. Under the “ABC test”, a worker will be classified as an employee unless all three of the following factors are satisfied: (A) the worker has the right to control his or her own work performance; (B) the worker performs tasks outside of the employer’s typical course of business; and (C) the worker does similar work in an independently established business or trade.

This new bill is intended to increase the number of workers classified as employees and provide greater protections for workers.  Although AB-5 will limit the number of workers that can be classified as independent contractors, the bill exempts certain professions, including doctors, dentists, lawyers, architects, accountants, engineers, insurance agents, investment advisers, direct salespersons, real estate agents, hairstylists and barbers, marketers and human resources professional with advanced degrees, and those performing work under a contract for professional services.

As mentioned, AB-5 has passed the State Assembly, but the bill is not law yet. It has advanced to the Senate, where the bill must receive a majority vote. To stay updated on the amendments, status, and votes concerning AB-5, please visit the following link: AB 5 – Worker Status.

Please note that there are hundreds of new cases decided every month, and several new federal, state, and local laws and regulations passed every year, which may or may not have an effect on any given client. As changes in the law occur that may impact our clients, we do try our best to keep our clients informed. Nonetheless, with constant changes in the law, it is not feasible for any law firm to ensure that every client is updated on every relevant case or law. However, AB-5 is currently a hot topic that could significantly affect many of our clients, and we will closely follow its legal evolution. For further updates concerning AB-5, please check out our website and Facebook page. If you would like to discuss AB-5 and how it may impact your business, please contact us to schedule a meeting.

This post is for informational purposes only, and merely recites the general rules of the road. Many legal rules have exceptions, however, and every case is unique.  Never rely solely on a blog/Facebook post in evaluating your situation — always contact an attorney when your legal rights and obligations are on the line.

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