When Californians return to work after the stay-at-home order is lifted, more changes could be coming to the controversial Assembly Bill 5 independent contractor law.
Before the coronavirus threat led to the suspension of the legislative session, the trucking industry won a court battle, and freelance writers gained some concessions from AB5’s sponsor, Assemblywoman Lorena Gonzalez, D-San Diego.
But the law, which took effect Jan. 1, still needs more work, Luke Wake, senior staff attorney at the National Federation of Independent Business (NFIB), told the Northern California Record.
“Assembly Bill 5 has been incredibly disruptive and we are pushing the legislature to make changes, to improve it to let people who want to be entrepreneurs have a path to do that,” Wake said.
Following the state Supreme Court’s unanimous ruling in Dynamex v. Superior Court of Los Angeles, which changed standards for classifying workers as employees or independent contractors, the Legislature codified that ruling in AB5.
Michael Faber, a Los Angeles attorney specializing in employment law, told the Record by email that additional changes will probably come through the Legislature.
“I do think more professions will be exempted from AB5, and Assemblywoman Gonzalez has certainly signaled that she is open to discussions and recognizes that AB5 is, in many respects, a work in progress,” Faber stated.
“Nevertheless, it also appears that some of the ‘refinements’ to the legislation may be a product of the political and economic strength of their proponents, more than the merits of their arguments. The current efforts by Uber and Lyft well illustrate the point,” Faber added.
The law contains what’s known as an ABC test, which effectively says that if someone does work essential to a company’s function, then that person must be an employee. Uber and Lyft have been working to get a measure on the November ballot that would let them keep employing drivers as independent contractors.
“I think the Covid-19 crisis will likely inform the debates over AB5 in ways that could not have been anticipated just a few weeks ago,” Faber added. “The relief bill (which Congress passed last week) will help gig workers in the short term, but this crisis dramatically underscores how unprotected all those Uber, Lyft, Instacart, Door Dash, and other workers are.”
The law contains a number of exemptions, but adding more is among the options under consideration. “The legislature could either clarify or tweak the business to business exemption to make it work for people,” Wake of the NFIB said.
Twelve criteria currently must be met to qualify for the B2B exemption.
“It’s too many regulatory tripwires that will make it difficult or impossible for entrepreneurs,” Wake added.
Amid the calls for repealing or dramatically changing the law, on March 12, Assemblyman Kevin Kiley, R-Rocklin, sent a letter to Gov. Gavin Newsom, asking him to suspend enforcement of laws like AB5 during the COVID-19 pandemic.
A more comprehensive review is in order, said Kyla Christoffersen Powell, President and CEO of the Civil Justice Association of California (CJAC).
“This piecemeal approach is not how policy should be implemented. California businesses need clarity in order to operate in accordance with the law. The current approach only breeds confusion and without a broader fix, we can expect increased litigation that drives entrepreneurs out of business,” Powell told the Record by email.
In any event, AB5 continues to spark debate.
“AB5 has done a very good job of tackling this problem of misclassification of employees,” Stanford Professor William B. Gould IV, former chairman of the National Labor Relations Board, told the Record. “They were attempting to save on labor costs, and avoid paying money to the state treasury simply by classifying employees as independent contractors.”
There is a move toward more exemptions, Gould added.
“There are some jobs that have created problems and she [Gonzalez] has indicated a willingness to hear people out and make some revisions.”
The changes won’t be altogether drastic, but Gonzalez seems amenable, Gould said.
In the meantime, workers in a number of professions are eager to see how it plays out.
“The preliminary injunction granted to the trucking industry is a step forward, however it is not a permanent fix,” Powell of the CJAC added. “Last year, some industries received Legislative exemptions from the new law, but many industries still remain unaddressed.”