The California legislature punted on taking down the odious AB 5 that is attempting to eliminate independent contractors in the construction and trucking industries in California.
Instead, they passed Assembly Bill 1516 which extends a layer of protection to construction subcontractors and construction trucking independent contractors. To receive this generous gift from Sacramento, there are conditions that must be met and pass possible inspection by the Labor Commissioner who is the cop on the beat for AB 5 violations.
Here’s the actual language in AB 1516 as it relates to subcontracting and construction trucking:
Section 2781 of the Labor Code is amended to read:
Section 2775 and the holding in Dynamex do not apply to the relationship between a contractor and an individual performing work pursuant to a subcontract in the construction industry, and instead the determination of whether the individual is an employee of the contractor shall be governed by Section 2750.5 and by Borello (a 13-point test from a 1989 Supreme Court case), if the contractor demonstrates that all the following criteria are satisfied:
a)The subcontract is in writing.
- b) The subcontractor is licensed by the Contractors State License Board and the work is within the scope of that license.
- c) If the subcontractor is domiciled in a jurisdiction that requires the subcontractor to have a business license or business tax registration, the subcontractor has the required business license or business tax registration.
- d) The subcontractor maintains a business location that is separate from the business or work location of the contractor.
- e) The subcontractor has the authority to hire and to fire other persons to provide or to assist in providing the services.
- f) The subcontractor assumes financial responsibility for errors or omissions in labor or services as evidenced by insurance, legally authorized indemnity obligations, performance bonds, or warranties relating to the labor or services being provided.
- g) The subcontractor is customarily engaged in an independently established business of the same nature as that involved in the work performed.
Construction Trucking Provisions
(h) Subdivision (b) shall not apply to a subcontractor providing construction trucking services for which a contractor’s license is not required by Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, provided that all of the following criteria are satisfied:
- The subcontractor is a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation.
- For work performed after January 1, 2020, the subcontractor is registered with the Department of Industrial Relations as a public works contractor pursuant to Section 1725.5, regardless of whether the subcontract involves public work.
- The subcontractor utilizes its own employees to perform the construction trucking services, unless the subcontractor is a sole proprietor who operates their own truck to perform the entire subcontract and holds a valid motor carrier permit issued by the Department of Motor Vehicles.
- The subcontractor negotiates and contracts with, and is compensated directly by, the licensed contractor.
- (2) For work performed after January 1, 2020, any business entity that provides construction trucking services to a licensed contractor utilizing more than one truck shall be deemed the employer for all drivers of those trucks.
- (3) For purposes of this subdivision, “construction trucking services” mean hauling and trucking services provided in the construction industry pursuant to a contract with a licensed contractor utilizing vehicles that require a commercial driver’s license to operate or have a gross vehicle weight rating of 26,001 or more pounds.
- (4) This subdivision shall only apply to work performed before January 1, 2025.
- (5) Nothing in this subdivision prohibits an individual who owns their truck from working as an employee of a trucking company and utilizing that truck in the scope of that employment. An individual employee providing their own truck for use by an employer trucking company shall be reimbursed by the trucking company for the reasonable expense incurred for the use of the employee-owned truck.
That’s it from the legislature, at least for this year.
Now we have to keep our eye on federal and state
courts where challenges to this attempt to end independent contracting in California and by example to many other legislative bodies, including the U.S Congress which has been tossing this political football around recently.