The employment laws in California have gone through a number of major changes over the past year. Assembly Bill 5 (AB5), which went into effect on January 1, 2020, put in place new rules for worker classification, specifying when a person may be considered an employee or an independent contractor. However, there has been some confusion about whether certain workers are exempt from these rules. A new bill, AB2257, was approved by California Governor Gavin Newsom on September 4, 2020, superseding, amending, and adding further complexity to the worker classification issue.

Exemptions Under AB2257

AB5 specified, with certain exceptions, that a three-part test, known as the “ABC test,” should be used to determine whether a worker should be classified as an employee or as an independent contractor. This test states that for a person to be considered an independent contractor, he or she must 1) be free from the control and direction of the company that hired him or her when performing his or her duties, 2) perform work that is not in the usual course of the hiring company’s business, and 3) regularly be engaged in a trade or occupation that has been established independently.

Since the beginning of March, it is an understatement to say that COVID-19 has greatly impacted business owners, employees, and the workplace nationwide. Most businesses have either gone remote, closed temporarily, or shut their doors for the last time. Not only are the businesses themselves leaving many people without work, but those who become infected with COVID-19 or are required to self-quarantine may be unable to work even if they are employed. In order to address the financial impact of coronavirus, the Internal Revenue Service (IRS) has implemented two new employer tax credits to help U.S. employees who have been affected by the global pandemic.

Sick and Family Leave

There are multiple credits tied to requests for medical leave since you may not necessarily be requesting this absence from work for your own self. The following are the employer credits to which you may be entitled:

In 2018, the California Supreme Court made a decision that would radically change how workers are classified in California. In the groundbreaking decision regarding Dynamex Operations West, Inc. v. Superior Court of Los Angeles, a new “ABC test” for determining worker classification was announced. According to the test, workers are presumed to be employees unless the hiring agency can establish that the worker is free from the agency’s direct control, he or she performs work that is outside the hiring agency’s normal business, and the worker is involved in an independently established job or business of the same nature as the work he or she performs for the hiring entity. 

California Assembly Bill 5 codified these criteria into law. Now, the California legislature is considering a number of bills that are intended to modify what many people consider to be the overly strict worker classification rules set forth in AB 5. One such amendment is Senate Bill 1039, or “The Independent Worker Rights Act of 2020.”

Controversy Over AB 5 Restrictions

Although proponents of AB 5 have stated that the law is intended to defend workers and guarantee wage protection, many people believe that the worker classification criteria set forth by the bill will do more harm than good – to both employers and workers. The bill has received harsh criticism from “gig economy” companies such as Uber, Lyft, and food delivery businesses. The trucking industry has also expressed serious concern as to the law’s constitutionality as it applies to truck drivers. Trucking companies have received a temporary exemption from AB 5 worker classification rules, but it is still unknown exactly how AB 5 will apply to trucking companies and other businesses that typically hire independent contractors.

By now, you have probably already heard about the massive changes being instituted by California Assembly Bill 5 (AB 5). The legislation codifies California Supreme Court case Dynamex Operations West, Inc. v. Superior Court into law. In this landmark case, the court held that the majority of California workers should be classified as employees and therefore are entitled to receive all of the benefits and protections associated with employee classification. Employers must classify all workers as employees unless the worker meets certain criteria. A number of industries have criticized the new bill, stating that the strict rules will damage businesses as well as current independent contractors’ ability to make a living. California Assembly Bill 1925, which is currently being considered by the state legislature, includes a modification of the current California Labor Code that may provide relief from the strict regulations to certain businesses.

Overview of California AB 5

In order for California workers to be classified as independent contractors, they must meet the three elements listed in the following “ABC Test:”

• (A) The worker performs services without the hiring agency’s direct control or instruction.
• (B)  The worker accomplishes tasks that are not within the hiring agency’s usual course of business.
• (C) The worker is involved in a private business or form of self-employment of the same type as that involved in the work performed for the hiring agency.

Several special interest groups have filed lawsuits against AB 5, saying that these regulations are too strict and that the law is unconstitutional. The trucking industry has been especially vocal in expressing concerns about how the law will affect truck drivers currently classified as independent contractors. Drivers cannot set their own schedule if they are forced to be classified as independent contractors, and trucking groups have argued that this violates the Interstate Commerce Clause of the Constitution. U.S. District Judge Roger Benitez has temporarily exempted trucking companies from AB 5 restrictions.  

Perhaps no other piece of California legislation has caused as much of a stir in recent years as Assembly Bill 5 (AB5). The bill was signed into law in September 2019 and went into effect on January 1, 2020. AB5, nicknamed the “gig worker bill,” significantly limits when employers can classify workers as independent contractors. Many companies that rely heavily on independent contractors are concerned about how the legislation will affect their ability to stay in business. The trucking industry has been one of the most vocal critics of the bill, and some recent developments may affect how these companies will operate going forward.

California Trucking Association’s Lawsuit Regarding AB5

Assembly Bill 5 instituted an “ABC test” for determining whether a worker can be classified as an independent contractor. According to AB5, all workers must be considered employees unless the following three criteria are met:

1. The worker is able to carry out services free from the direct control of the company.
2. His or her work tasks are not part of the company’s usual course of business.
3. He or she is performing work that is of the same nature as that which he or she is ordinarily engaged in.

Many trucking industry employers and workers are especially concerned with part B of this test. Along with two owner-operators, the California Trucking Association (CTA) filed a lawsuit to fight the new restrictions regarding worker classification. The association argued that the legislation will threaten the livelihood of over 70,000 truckers who are currently classified as independent contractors. The CTA further contends that the new restrictions implemented by AB5 conflict with the Federal Aviation Administration Authorization Act of 1994 and the Federal Motor Carrier Safety Act.