AB 5 Bill regarding Independent contractors effective 07/01/2020

The state of California recently passed Assembly Bill 5 (“AB 5”), which defines a new test to determine whether a worker In California is classified as an employee or Independent contractor under the California Labor Code, With respect to Workers’ Compensation insurance, AB 5 goes into effect on July 1, 2020 and applies to policies issued on or after July 1, 2020, as well as policies in force as of July 1, 2020. Please note that this new legislation is not based on policy effective date.
For the purposes of wages, Workers’ Compensation insurance, and other benefits, AB 5 adds Section 2750,3 to the California Labor Code, which states in pertinent part:
2750,3.
(a)(l) For purposes of the provisions of this code and the Unemployment Insurance Code, and for the wage orders of the Industrial Welfare Commission, a person providing labor 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:

THE CONDITIONS ARE AS FOLLOWS:

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

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(2) Notwithstanding paragraph {1), any exceptions to the terms “employee,” “employer,” “employ,” or “independent contractor,” and any extensions of employer status or liability, that are expressly made by a provision of this code, the Unemployment Insurance Code, or In an applicable order of the Industrial Welfare Commission, including, but not limited to, the definition of “employee” in subdivision 2(E) of Wage Order No. 2, shall remain in effect for the purposes set forth therein.
(3) If a court of law rules that the three-part test in paragraph (1) cannot be applied to a particular context based on grounds other than an express exception to employment status as provided under paragraph (2), then the determination of employee or independent contractor status In that context shall Instead be governed by the California Supreme Court’s decision in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.

About Daniel McKenna

Dan McKenna
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