There is so much conversation regarding the passage of Assembly Bill 5 in this session of the California Legislature that it is important to take note of what this bill is and isn’t about. AB5 passed the State Assembly back in May, and then the Senate in September. Governor Newsom signed the bill, and it becomes law effective January 1, 2020.
Foremost for those of us engaged in the construction industry the measure does not change the normal practice of subcon- tracting, nor, for those members with a union workforce, does it make any change in that employer/employee relationship.
Occupations considered exempt from the law include: licensed insurance agents, certain licensed health care professionals, registered securities brokerdealers or investment advisers, direct sales salespersons, real estate licensees, commercial fishermen, workers providing licensed barber or cosmetology services, and others performing work under a contract for professional services (lawyer, architect, engineer, private investigator, or accountant), with another business entity.
Where this will affect ECA contractors is in the trucking aspects of their businesses.
Last April the California Supreme Court issued a decision in the Dynamex Operations West, Inc. case ruling that certain workers should be presumed employees instead of independent contractors. Among other things, the Court cited the harm to misclassified workers who lose significant workplace protections, and the loss to the state of needed revenue from companies that use misclassification to “avoid” payroll obligations. It required that companies use a newly adopted ABC test to determine who is an independent contractor, which consists of certifying:
A. That the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
B. That the worker performs work that is outside the usual course of the hiring entities business; and
C. That the worker is customarily engaged in an independ- ently established trade, occupation, or business of the same nature as the work performed.
A two-year construction exemption is in the bill where drivers in the trucking industry would have to have independently established businesses or provide trucking services to other companies. Owneroperators would be required to contract directly with construction contractors licensed by the State of California.
This story is far from over. We expect a massive legal battle launched by “gig” giants like Uber and Lyft that may last years, and possibly headed for the U. S. Supreme Court, with the outcomenotclearatall.
By Ray Baca, Executive Director Email: [email protected]