California’s Current Independent Contractor Laws
It’s challenging to keep up with the ever-changing world of employment laws. The regulations in California that govern the classification of independent contractors have undergone a number of revisions in recent years, making it hard to keep up with the most up-to-date versions.
If you’re an employer in California, you should be informed of the state’s current independent contractor Laws so that you may properly categorize your employees and avoid heavy penalties for misclassification. Working with an experienced lawyer can help an employer stay abreast.
Assembly Bill 5 (AB5), the state’s most fundamental independent contractor statute in decades, went into effect in January 2020, impacting millions of workers across California. Most California employers now classify their workers and independent contractors differently thanks to AB5.
Known as the Dynamex case, a key court judgment formalized the “ABC” test. Any worker is deemed to be an employee under AB5. The burden of proof is on the employer to show that the employee should be classed as an independent contractor.
Employers in California are required to utilize the three-part “ABC” exam to prove an employee is an independent contractor. A worker is considered an independent contractor if they meet the following three criteria:
- They are free from control and discretion in performing their work;
- They perform work outside the usual course of the employer’s business; and
- They are customarily engaged in an independently established business or trade.
There are some exemptions, including those established in November 2020 by Proposition 22. What exactly is Prop 22 and how does it affect independent contractors in California?
While AB5 was designed in response to the growing gig economy. Ride-sharing companies like Uber and Lyft backed a pricey ballot proposal exempting workers from the law, preventing delivery and ride-share drivers from getting the benefits granted to non-independent employees.
During the November 2020 elections, Proposition 22, the most expensive ballot measure in California history, was approved, reclassifying millions of gig workers and ride-share drivers as independent contractors.
However, in August 2021, an Alameda County Superior Court Judge decided that portions of Prop. 22 were unlawful after hundreds of lawsuits were filed. Currently, Proposition 22 is in force while appeals are pending, but the future of California’s independent contractor rules is still up in the air.
An experienced lawyer can help you stay up to date with California’s independent contractor laws so that you can avoid misclassifying workers.