Part 2. Classification of Workers of California’s New Laws Scheduled to Take Effect in 2020
One major California law that affects California employment is the codification of the Dynamex decisions which changed the way workers are classified. Now, many more workers will qualify for employee status and not independent status which can mean more pay and more benefits. Anyone who is being treated as an independent contractor should inquire about this new law.
Classification of Workers
AB5 was passed in response to the court decision of Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex). That case and this law create a presumption that workers who do their jobs for a hirer are employees and not independent contractors – for wage and benefit purposes. The law and case both require a three-part test (called the ABC test) to determine the employment status. The new law has a broader scope than the Dynamex decision.
The three-part test, as set forth in Dynamex and AB5, includes the following analysis.
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
The effect of employee status impacts the taxes employers must pay on behalf of the worker, unemployment insurance, disability insurance, Social Security, vacation right, employee rights, and other benefits. The law recognizes that the misclassification of workers as independent contractors has contributed to “the erosion of the middle class and the rise in income inequality.”
. There are many exceptions and many timelines that are complicated. For example, the old test of control and not the new Dynamex test apply to a “lawyer, architect, engineer, private investigator, or accountant.” The ABC test will apply to some other legal classifications such as workers’ compensation rights but may not apply to unemployment rights and claims under the Fair Employment and Housing Act.
Employers who fail to reclassify their workers according will be subject to legal consequences as set forth in the law.
Anyone who is being paid as an independent contractor should consult with the Law office of Stephan Danz. You can reach at online contact form.or using our