Some have questioned the business community advocating a “support, if amended” position on AB 5 (Gonzalez), the bill that seeks to codify last year’s California Supreme Court ruling in Dynamex Operations West regarding worker classification and impose the “ABC Test”.
The Supreme Court and subsequent appellate court decisions have ruled up to this point that the Dynamex decision applies only to the IWC’s Wage Orders governing meal breaks and rest periods, overtime, etc. AB 5 would expand the reach of the court’s decision.
However, for practical purposes, the California Supreme Court is unlikely to make a different determination than it did in Dynamex if other Labor Code claims (e.g., employee expense reimbursement) or a UI claim were brought forth and the business claimed that the “ABC Test” did not apply. Hence, while AB 5 does expand the scope of the court’s decision, it is probably just a matter of time before those expansions occur judicially.
In addition, AB 5 would apply to all industries even though the Dynamex decision only interpreted one of 17 Wage Orders (Wage Order # 9, Transportation Industry). However, all of the IWC Wage Orders have the same language that was interpreted by the Supreme Court in Dynamex, so there is no reason to believe the Court would rule differently if cases were brought under the other Wage Orders.
AB 5 represents a tension between achieving some success (i.e., limiting the reach of the court decision) or possibly no success. Without a statute, the Dynamex decision is the “law of the land” in California. Hence, if there are to be any changes to the ABC Test, or if any industry or profession wants to be excluded from the ABC Test, it needs a statute to do so.
Other bills were introduced earlier this year to codify the previous test used for determining independent contractor status (the Borello case) or invoke the federal test, but those measures were unsuccessful. As such, the business community was left with AB 5.
There are essentially three issues that should have been addressed in AB 5: the ABC Test itself (no changes were made to it); the industries exempted (many professions received an exemption, while numerous ones did not); and, the effective date whether the law is prospective or retroactive (only addressed for those exempted from the ABC Test).
Unfortunately, AB 5 did not modify the ABC Test itself. The Dynamex decision’s application of the ABC Test is among the strictest of the states because it does not provide any flexibility. For example, other states allow two of the three prongs to be met; or they are less limiting in the B Prong dealing with workers in the “usual course of business” of the hiring entity.
The second issue concerns the “exemptions.” More than thirty occupations have been provided exemptions. However, there are dozens of professions that are licensed and regulated pursuant to the Business & Professions Code, for example, that are not included in AB 5. Moreover, there should be several generalized exemptions, such as a business-to-business agreement or workers who meet temporary staffing demands.
Finally, but certainly one of the most critical issues, is the effective date of the ABC Test. As a matter of public policy and fundamental fairness, it should be made prospective. While the Supreme Court’s decision was silent on the issue, changing the law really should ensure this new test is not applied retroactively. The only way to do so is with a statute.
In the end, while some of these core issues were only partially addressed, passing AB 5 was basically the only “game in town.” Hopefully, during the upcoming 2020 Legislative Session, there will be changes made to the ABC Test itself and additional exemptions added to the law.
Chris Micheli is an attorney and legislative advocate for the Sacramento governmental relations firm of Aprea & Micheli, Inc.