California Freelancers Closer to Getting a Break from Strict Contractor Rules

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Certain freelance journalists and musicians would be exempt from California's  AB 5—the controversial new independent-contractor test that took effect Jan. 1—under proposed legislation approved by the state Assembly on June 11. The California Senate now has until Aug. 31 to consider the measure.

AB 5 aims to provide workplace protections to more people by requiring businesses to reclassify many gig workers as employees. Employees are entitled to a minimum wage, overtime pay, unemployment insurance and other benefits that are not generally provided to independent contractors.

The law, which has been challenged by ride-hailing services Lyft and Uber, was written to cover a broad range of independent contractors.

Currently, freelance writers, photographers, editors and cartoonists fall under AB 5 if they produce more than 35 works per year for a single client. Among other changes, the proposed legislation would establish an exemption for services provided by such workers if they're operating under a contract that specifies certain terms in advance and:

  • The service is not replacing an employee performing the same work at the same volume.
  • The contractor does not primarily perform the work at the hiring entity's business location.
  • The contractor is not restricted from working for more than one hiring entity.

The proposal would also create an exemption for certain workers in the music industry and apply another independent-contractor test, known as the Borello test, to the covered occupations. The Borello test primarily looks at who controls the work. 

"Having heard additional feedback from a variety of freelance writers, photographers and journalists, we are making changes to Assembly Bill 5 that accommodate their needs and still provide protections from misclassification," said Assemblywoman Lorena Gonzalez, D-San Diego, who introduced the bills.

We've rounded up resources and articles from SHRM Online and other trusted outlets on California's independent-contractor test.

The 'ABC Test'

Effective Jan. 1, AB 5 codified a 2018 California Supreme Court decision, Dynamex Operations West, Inc. vs. Superior Court of Los Angeles, which created a three-pronged test, called the "ABC test," to determine whether a worker should be classified as an employee or independent contractor.

The test used prior to the ABC test was a multifactor analysis that primarily focused on who exerted control over the work. But under the ABC test, all three of the following factors must be met for a worker to be properly classified as an independent contractor:

  • The worker 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.
  • The worker performs tasks that are outside the usual course of the hiring entity's business.
  • The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

The Dynamex decision expanded the definition of "employee" under the California Wage Orders and placed the burden on companies to prove that independent contractors are properly classified. Though this decision only applied to wage orders, AB 5 extends the ABC test to all provisions of the California Labor Code and Unemployment Insurance Code unless another definition of "employee" is provided.

(SHRM Online)

Coronavirus Fuels AB 5 Debate

Coronavirus concerns have raised questions about California's strict independent-contractor test and whether it should be amended. Although gig workers and other independent contractors have access to some federal emergency relief, they generally aren't entitled to unemployment compensation. Even before COVID‑19 hit, legislators, union leaders, business groups and other key stakeholders were discussing potential amendments to AB 5.

(SHRM Online)

Uber and Lyft Face Employee Misclassification Lawsuit

For now, the ABC test applies to app-based drivers, and California officials are suing Uber and Lyft for allegedly misclassifying their drivers as independent contractors. California Attorney General Xavier Becerra is seeking millions of dollars in back pay for allegedly misclassified drivers. "California has ground rules with rights and protections for workers and their employers," Becerra said. "We intend to make sure that Uber and Lyft play by the rules." 

(California Department of Justice)

Voters to Weigh In on Exception for App-Based Drivers

California voters will get to weigh in whether app-based drivers should be classified as independent contractors rather than employees because of a ballot initiative supported by Uber, Lyft and several grocery and food delivery services. The ballot measure would also ensure app-based drivers receive certain benefits, including minimum net earnings of 120 percent of the state's or locality's minimum wage and 30 cents per mile, healthcare subsidies, occupational accident insurance, and accidental death insurance. Companies would have to develop anti-discrimination and sexual harassment policies, and drivers would be limited to working 12 hours during a 24-hour period.

(Ballotpedia)

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