EMPLOYEES VS INDEPENDENT CONTRACTORS
May 11, 2021
California Assembly Bill (AB) 5 changed the employment landscape in California on January 1, 2020, by making it more difficult for employers to classify workers as independent contractors.
Classifying workers as independent contractors allows employers to avoid paying taxes, offering benefits, and observing minimum wage and overtime laws and other employee legal mandates. AB5, however, imposed a tough three-part test — called the ABC test — to determine employee vs. independent contractor status.
AB5, however, didn’t last long without revision — first by another Assembly Bill and then by a voter-approved initiative. AB2257, enacted in September 2020, expanded the list of professions exempted from AB5. Proposition 22, passed in November of the same year, exempted app-based driver companies Uber and Lyft from AB5 but expanded their employment responsibilities at the same time.
If you work in Murrieta, Temecula, Costa Mesa, Newport Beach, Irvine, or Stockton, California, and feel you’ve been cheated out of full employment benefits by being misclassified, contact us immediately at Robinson Bradford LLP. Our employment law attorneys will listen to your situation, assess your proper status, and help you achieve your full rights as an employee in California.
Employee Classification Under AB5
AB5 codified a decision by the California Supreme Court in Dynamex West Operations, Inc., v. the Superior Court of Los Angeles, which established what has come to be known as the ABC test.
Before Dynamex, the state had used the single “right to control” standard under an earlier court decision now referred to simply as Borello. In use since 1989, the Borello standard held that a worker was an employee if the hiring company had the “right to control” the worker’s hours and other conditions and requirements of work. Borello survives as the first prong of the ABC test now in use.
As a result of Dynamex and AB5, the ABC test currently mandates that to be classified as an independent contractor, a worker must:
Be free from the control and direction of the hiring entity in performing their work
Be performing work that is outside the usual course of the hiring entity’s business
Be customarily engaged in an independently established trade, occupation, or business that routinely performs the type of work called for under the hiring arrangement
Benefits of Being Classified as an Employee
When enacted, the sponsors of AB 5 estimated that there were approximately one million misclassified workers in the State of California. With full employee status, those workers would be subject to the wage and hour and other orders issued by the California Department of Industrial Relations, Industrial Welfare Commission.
The most common wage order concerns the minimum wage paid to employees, which as of 2021 is $13 per hour for companies with more than 25 employees and $12 for companies with 25 or fewer employees (though some counties and municipalities adhere to higher rates.) Other statewide wage orders concern overtime pay, meals and rest periods, sick leave, and accrued vacation pay (though vacation itself is not mandated).
Employee status also confers benefits and protections arising from California Unemployment Insurance, California Workers’ Compensation Insurance, California Paid Family Leave, and California Short-Term Disability laws and mandates.
Effects of AB2257 and Proposition 22
AB2257 was rushed into law to protect certain professions from the mandates of the ABC test. AB5 originally exempted physicians, surgeons, lawyers, architects, engineers, licensed accountants, commercial fishermen, and veterinarians. The September amendment acknowledged the “existing flexibility California has allowed in the music industry while protecting the right for musicians to have basic employment protections just like every other worker,” and thus exempted creative workers, including writers, photographers, videographers, photo editors, and illustrators, among others.
Proposition 22, launched by Uber and Lyft, was approved by voters during the November 2020 election, It exempts app-based drivers from AB5 but guarantees them increased compensation and some benefits, including health care subsidies.
Enforcement of AB5
Both the government and workers themselves are eligible to take legal action against employers for violating the employee status standards codified by AB5. The California Attorney General and some City Attorneys can bring claims on behalf of workers. In addition, civil fines can be levied in the range of $5,000-$25,000 per violation.
Since AB5 was codified under the California Labor Code, violations fall under the Labor Code Private Attorneys General Act, which allows aggrieved workers — current or former — to file lawsuits for lost pay and benefits.
Work with Experienced Employment Law Attorneys
If you feel you’ve been misclassified as an independent contractor and lost wages and benefits as a result, our team at Robinson Bradford LLP is ready to help you exercise your full rights. We will investigate your claim, assess what should rightfully be yours, and then engage with your employer and the appropriate government agencies to pursue a fair settlement.
At Robinson Bradford LLP, we proudly serve clients in or around Murrieta, Temecula, Costa Mesa, Newport Beach, Irvine, and Stockton. Contact us for a consultation.