What is the New California Law Impacting Employees and Contractors?

The law that started protests around the city is now in effect, and it is crucial that employers and employees know what it entails.

It was in September 2019 that Assembly Bill 5 (AB-5) was signed into law, and it came into effect on January 1, 2020. The new law requires employers to apply the ABC test when deciding if workers should be classified as employees or independent contractors. The ABC test was first established by the Supreme Court in 2018, and the new law adds a section to the Labor Code that addresses the issue. Below are the three elements of the ABC test, and how they should be applied to worker relationships.

Part A

The first part of the test required by AB-5 states that to be classified as an independent contractor, the worker must be free from the control and direction of the employer while performing work. To satisfy this part of the test, employers must establish that the worker is not in their control. Workers that are subject to the direction and control of their employer are considered employees and not contractors. Depending on the nature of the work and any agreements made between the employer and the worker, employers do not necessarily need to be in complete control of the work in order for a worker to be classified as an employee.

Part B

Part B of the test requires employers to prove that the worker performs work outside of the usual duties performed within the business in order to be considered an independent contractor. For example, a retail establishment may require work on the building’s plumbing and so, they hire a plumber. Plumbing is not part of a retail store’s usual part of business and so, employers can classify these individuals as contractors. Any time the work of one person is comparable to the work of another, such as two sales associates within a store, they are most likely both required to be classified as employees.

Part C

The third part of the ABC test states that workers must be engaged in an established trade, business, or occupation in order to be classified as independent contractors. Planning to open a business or enter into an occupation in the future is not enough. The worker must already be engaged in these ventures. Additionally, if the worker only works for the employer, they are likely also not considered a contractor, but an employee.

Were You or One of Your Employees Misclassified? Our Murrieta Employment Lawyers Can Help

Employers often misclassify employees as contractors. Unfortunately, misclassification can violate an employee’s rights to legal wages, overtime pay, and more. If you believe you or one of your employees. Call us today at 951-816-3435 or contact us online to schedule a meeting with one of our skilled attorneys.