What Is California AB5?

Drivers for Uber and Lyft could be affected by the new California AB5 rule and they’re not the only ones. Companies employing contractors and employees or workers previously classified as contractors should be aware of the implications of this California AB5 rule to avoid exposure to potential lawsuits.

The new gig employment law will put a stop to a practice of improperly classifying certain workers as independent contractors, according to the San Francisco Chronical, a move that allows employers to skirt labor protections in some cases. While employers are still able to use independent contractors, companies must be aware of the limited circumstances in which California AB5 allows them to do that and still comply with laws.

The governor recently announced his plans to sign the bill, which will fully take effect in 2020. He signed the bill just a few days later.

In short, the bill makes it harder for companies to claim that some workers are really independent contractors. A test must now be used by a company in order to show that the proper classification of a worker is, indeed, independent contractor.

Workers must actually be treated and paid as employees if they carry out tasks under the control of the company, complete work that is considered integral to the operation of the company, and do not have independent enterprises in the same trade.

This is an important distinction given the rise in many workers classified as independent contractors but making the argument their work environment and arrangement means they should have been categorized as employees.

Employees are eligible for workers’ compensation, minimum wage, expense reimbursement, unemployment insurance, paid family leave, and paid sick leave. In addition, employers must pay half of an employee’s Social Security tax. Independent contractors, however, don’t get these benefits.

Those benefits can represent a substantial cost for each employee paid by the employer. Some workers claim that companies are attempting to skirt their legal responsibilities by classifying workers as contractors when the work arrangement doesn’t meet the legal grounds to claim that.

What Must Companies Do to Comply with the New Law?

Under the new California AB5 law, companies will have to pay more attention to each individual worker and whether or not the three-part employee test has been met. Companies like Uber and Lyft, which have been the subject of worker claims about misclassification, argue that their drivers still qualify as independent contractors under the new law.

There are numerous exemptions to the AB5 law, however, so workers should do their research before asserting a legal claim that they have been paid improperly. The most common exemptions have to do with workers making at least twice the minimum wage, those communicating with customers directly, and those who can negotiate or set their own rates.

Common examples of those exemptions to the California AB5 law include stockbrokers, insurance agents, dentists, doctors, commercial fisherman, hairstylists, accountants, lawyers, real estate agents, grant writers, graphic designers, professionals in marketing, and administrators in human resources.

Exceptions also affected editors, cartoonists for newspapers, freelance writers, and photographers who make less than 36 submissions a year.

If you believe that you’ve been subject to independent contractor misclassification, consider speaking with an attorney about your case.

Join a Free Uber & Lyft Class Action Lawsuit Investigation

If you work as a Lyft or Uber driver in California, you may have been misclassified as an independent contractor, and you may qualify to join this California independent contractor class action lawsuit investigation.

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