Written by Jeremy Mittman and Adé Jackson Earlier this month Governor Newsom signed AB 2257, which was the culmination of a furious lobbying effort by specific industries (only some of which were successful) to amend California’s new independent contractor law (also known as “AB 5”). It was also considered a “cleanup” bill to tinker around the edges of the law’s requirements. Much of the controversy … Continue reading Independent Contractor or Employee? With Recent Amendments to California’s AB 5 Law, The Battle Continues
On September 18, 2019, California Governor Gavin Newsom signed into law A.B. 5, codifying the “ABC test” adopted in the California Supreme Court decision, Dynamex (see, e.g. prior posts here, here, and here) and ensuring that most California workers should appropriately be classified as employees instead of independent contractors. The bill goes into effect January 1, 2020.
Though supporters state that the bill is aimed primarily at the so-called “gig economy,” in reality A.B. 5 affects virtually every type of business in California.
Why This Matters
On Thursday, May 2, in Vazquez v. Jan-Pro Franchising International, Inc., a three-judge panel of the Ninth Circuit Court of Appeals held that the California Supreme Court’s ruling in Dynamex Operations West, Inc. v. Superior Court applies retroactively. In Dynamex, the Supreme Court adopted a new standard for determining whether a California worker is an employee or independent contractor under the California Industrial Welfare Commission’s (“IWC”) wage orders. As we have previously discussed (see here, here, and here), Dynamex’s reach continues to grow and the Ninth Circuit’s ruling in Vazquez should be of particular concern to employers, who now face potential liability for their past decisions to classify workers as independent contractors rather than employees under a standard that did not exist at the time. Continue reading “Dynamex Goes Back in Time”
On April 30, 2018, the California Supreme Court issued its opinion in Dynamex Operations West, Inc. v. The Superior Court of Los Angeles County. It is likely that this case will drastically alter the landscape in California as to how workers are classified. From a tax perspective, the result could be significantly increased costs and administrative burdens for businesses operating in California.
For tax purposes, workers are divided into two categories- employees and independent contractors. The tax withholding and reporting obligations with respect to each category of worker are substantially different and significant dollars can turn on how a worker is classified. Continue reading “Is Everyone Now an Employee in California?”
In Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court issued a unanimous decision adopting a new standard for determining whether a California worker is an employee or independent contractor under the wage orders adopted by California’s Industrial Welfare Commission. In adopting the new standard, the Court noted that, under the wage orders, “employ” has three alternative definitions: “(a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law employment relationship.” Of these, the broadest definition is “to suffer or permit” to work. As the Court stated:
“We conclude that in determining whether, under the suffer or permit to work definition, a worker is properly considered the type of independent contractor to whom the wage order does not apply, it is appropriate to look to a standard, commonly referred to as the ‘ABC’ test, that is utilized in other jurisdictions in a variety of contexts to distinguish employees from independent contractors. Under this test, a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that 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; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that 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.” Continue reading “California Supreme Court Adopts “ABC” Test As Standard To Determine Independent Contractor Status Under the Wage Orders”