California employers contend with some of the most stringent wage and hour laws in the country. The combination of federal regulation with strict state and local compliance makes for some challenging decisions for an employer. A recent California law is aimed at providing even more regulation for companies like Uber, Grubhub, DoorDash and Lyft that rely on “gig workers.”
A new work environment
With the State Assembly Bill 5 (AB5) going into effect this year, many employers must reclassify contractors as employees. The Governor signed the bill into law in September 2019 and it went into effect on January 1, 2020. The law took the 2018 California Supreme Court ruling for Dynamex Operations West, Inc vs. the Superior Court of Los Angeles case and expanded it for the state to provide the criteria for employee classification. The law forces employers to make the assumption that all workers are employees unless that employer can validate these three criteria:
- A worker is not under the control of the company/client when carrying out their tasks.
- The worker performs work that is not typical of the company’s business tasks.
- The worker’s business or trade is the same as (or represented in) the work performed for the company/client.
Maintaining reasonable compliance standards
If a company cannot prove those three criteria, it should reclassify a worker from an independent contractor to an employee, requisite with such entitlements as minimum wage and company benefits. This change in the legal landscape surrounding independent contractors can be a difficult transition for many employers, especially those with mid-sized and smaller companies that might not have the capital to quickly adjust to these new regulations. If you have a company that hires independent contractors or have questions regarding AB 5, an attorney with in-depth knowledge of employment law in California can help you explore your options.