California Assembly Bill 5: New Changes

Employees are entitled to greater labor protections, such as minimum wage laws, sick leave, and unemployment and workers’ compensation benefits, which do not apply to independent contractors. California Assembly Bill 5 is a California law which limits the use of classifying workers as independent contractors rather than employees by companies in the state.

In September 2019, the California Senate passed this bill to manage the concerns over employee misclassification especially in the gig-economy and the legislation goes into effect on January 1, 2020. 

The ABC test is used to properly classify a worker as an employee or an independent contractor. The employer is required to prove that a worker is properly classified as an independent contractor by fulfilling all the three conditions as follows:

• The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact 
• The worker performs work that is 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. 

Exempted

Doctors (physicians, surgeons, dentists, veterinarians, psychologists), professionals (lawyers, architects, engineers), professional services (marketing, human resources, travel agents, graphic designers, grant writers, fine artists), financial services (accountants, securities broker-dealers, investment advisors), insurance brokers, etc. 

Not Exempted 

Rideshare, delivery service workers, other gig economy workers, truck drivers, janitors and housekeepers, health aides, performers and entertainment professionals, land surveyors, landscape architects and geologists, campaign workers and more. 

Is AB5 Bill Good or Bad?

Businesses save about 30% in costs when they hire independent contractors but, working as independent contractors the workers have to pay the entire portion of payroll taxes which lowers their income.

The bill does seem to be good for the workers, as being classified as employees will secure labor protection like minimum wage, overtime, health insurance benefits and workers compensation for more than a million Californians.

The bill will also help bring in more tax revenues from businesses and enable unionization throughout the gig industry. The bill is not set in stone and there could be more changes in the time to come. 

If you are a truck driver, rideshare worker or any other worker who is part of the gig economy and you have any questions regarding the AB5 bill, contact our office at 909-217-7855. We are here to help you and ease your burden.