New California Law Increases Protections For Worker
AB5, signed into law on September 19, 2019, aims to make it much more difficult for employers to misclassify employees as independent contractors.
California employees have many rights protections in the workplace that independent contractors do not. For example, California's discrimination and harassment laws largely fail to protect independent contractors. The same goes for California wage and hour laws. For example, independent contractors are not entitled to overtime pay. The law has long held control over a worker to be the most significant factor in determining if a worker is an employee or independent contractor.
Under the new law, a worker can only be classified as an independent contractor if: (a) the worker is free from control and direction in the performance of services; and (b) the worker is performing work outside the usual course of the business of the hiring company; and (c) the worker is customarily engaged in an independently established trade, occupation, or business.
If you report to work based on an employer's schedule, use the employers equipment to do your job, perform the job as directed by your boss and your duties are central to the purpose of the employer's business, you are likely an employee. On the other hand, if you hire a plumber to fix your kitchen sink, the plumber is an independent contractor, not an employee. Most plumbers work based on his or her availability, they bring their own tools to perform their job and make decisions on how to complete the job independently of the person hiring them.
Employers often misclassify employees as independent contractors to save money and avoid labor laws. Employers do not have to pay independent contractors overtime, expense reimbursement, payroll taxes and avoid many other laws that add costs to the employer's bottom line.
Employers fought hard to dismantle this bill, claiming it would decimate California's growing "gig economy." Take drivers for Uber, Lyft, Doordash and Postmates to name just a few companies touting the benefits of the gig economy. These companies argue independent contractor status for these drivers allows maximum flexibility for their workers. Of course, the vast majority of these workers question the "benefits" of working for themselves. Just the costs of a vehicle, insurance, gas, and wear and tear on a vehicle can minimize take-home pay. Plus, laws protecting gig economy workers are slim to none.
Large corporation will continue to fight this law, hoping California courts will find it unconstitutional.
In the meantime, the manner in which this law will be enforced is in flux, but it is safe to say AB5 is a big step forward in protecting California employees.
If you have questions about this topic or any employment-related conflict, feel free to contact Christopher Taylor.