California Governor Signs “Gig Worker” Bill into Law

Yesterday (September 18, 2019), California Governor Gavin Newsom signed into law Assembly Bill 5—the much talked about “gig worker” law that strikes at the heart of the business model for Uber, Lyft, and a number of other important “gig economy” companies. That the governor quickly signed the bill came as a surprise to no one. He had signaled support for the measure and the bill passed overwhelmingly in both houses of the California Legislature.

Codification (and Expansion) of High Court’s Dynamex Holding

The new law, which codifies and broadens the holding of the California Supreme Court in Dynamex v. Superior Court, 4 Cal. 5th 903, 416 P.3d 1, 83 Cal. Comp. Cases 817 (2018), provides for a presumption that all gig workers are employees and, therefore, entitled to minimum wage, workers’ compensation, and other benefits as of the effective date of the legislation, January 1, 2020. Paroting Dynamex, the new law specifies that any person providing labor or services for remuneration shall be considered an employee, rather than an independent contractor, unless the “hiring entity” demonstrates that all of the following conditions are satisfied [emphasis added]:

A. The person 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. The person performs work that is outside the usual course of the hiring entity’s business.

C. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Attorneys will recall that the holding in Dynamex was limited to California wage orders. While the new law applies the ABC test to wage orders, it also applies to both the California Labor Code [e.g., workers’ compensation claims] and the Unemployment Insurance Code.

Author of the bill, Assemblyperson Lorena Gonzalez, allowed in her bill-signing statement, “Today, we are disrupting the status quo and taking a bold step forward to rebuild our middle class and reshape the future of workers as we know it.” Others are left to wonder, however, if the bill isn’t just one more special interest piece of legislation. After all, my analysis indicates the bill has seven separate categories of exemptions. More than 50 types of workers are specifically excluded from the so-called “protections” afforded by the legislature.

Status of Borello & Sons

Until passage of the new law, California labor law had been governed by S. G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341, 769 P.2d 399, 256 Cal. Rptr. 543, 54 Cal. Comp. Cases 80 (1989). I’m vastly oversimplifying here, but Borello is essentially a common-law “control” test. Borello will continue to the utilized for those many types of workers who are excluded from the coverage of AB 5. My reading of the bill—at least the last version of the bill that I reviewed about two weeks ago (there have been multiple revisions) indicates that it will apply, as of January 1, 2010, to the Unemployment Insurance Code.

More About AB 5 in the Coming Days

I’ll sift through the bill another time or three and provide some additional commentary in the coming days. In the meantime, I’d welcome your comments.