Law Alert: California ABC Test - Controversial AB 5 Moves to Governor
September 11, 2019
California ABC Test - Controversial AB 5 Moves to Governor
Transportation Law Alert & Webinar Invite
On September 11, 2019, the California legislature passed AB 5, that largely codifies the 2018 Dynamex decision’s ABC test, which will affect many small businesses in California. What’s more, it will alter business relationships with many companies who work with those small businesses—not the least of which are transportation companies. AB 5 will become law on January 1st and will apply to all of California’s Labor and Unemployment Insurance Codes. It will now move on to the Governor – who has publicly stated he will sign the legislation – for final approval despite significant opposition from major tech businesses such as Uber & Lyft.
The final version of the legislation specifically identifies several industries that are exempt from application of the Dynamex ABC test (a test requiring that the contractor not be in the normal course of the hiring entity’s business) and would, instead, be subject to the pre-Dynamex multi-factor balancing test that was set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations. This includes an exemption for qualifying business-to-business relationships where the contractor-work is provided by a formal business entity operating under a series of strict factors.
Importantly, trucking and transportation (with the exception of some owner-operators providing services in the construction industry and newspaper delivery drivers), as well as gig economy companies, did not receive stand-alone exemptions, making it likely that such businesses will be subject to the ABC test unless they can satisfy the difficult business-to-business exception. The legislation’s sponsor, Assemblymember Gonzalez, has suggested she remains open to business-favorable changes or clarifications in next year’s legislative session. Additionally, major gig economy companies (including Uber, Lyft, and DoorDash) have pledged up to $90 million to support a 2020 ballot initiative regarding the use of independent contractors in the gig economy.
The Scopelitis Firm will host a webinar to discuss next steps and provide greater insight given this development in California’s law. Plan your schedule to join on September 20, 2019 at 12:00 pm EDT. Please register in advance.
For more information on how this AB 5 news might affect your business, please contact Greg Feary, Chris McNatt, Shannon Cohen, or Kelli Block.
Scopelitis Transportation Law Alerts are intended as a report to our clients and friends on legal developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
© Scopelitis, Garvin, Light, Hanson & Feary, P.C. 2019. All rights reserved.
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