On January 1, 2020, California’s new worker classification law known as Assembly Bill 5 (“AB 5”), goes into effect.  AB 5 codifies the three-factor “ABC” test adopted by the California Supreme Court in its 2018 Dynamex decision.

The bulk of newly added Section 2750.3 of the California Labor Code describes the various categories of workers and businesses that were fortunate enough to negotiate an exemption from the ABC test in the waning days of the last legislative session.  These lucky few include:

  • Licensed insurance agents, doctors, dentists, veterinarians, psychologists, lawyers, architects, engineers, private investigators, accountants, direct sales salespersons, securities broker-dealers, investment advisors, or commercial fishermen;
  • Real estate licensees and repossession agencies;
  • The services provided by a human resources administrator, travel agent, graphic designer, grant writer, fine artist, photographer or photojournalist, freelance writer/editor, freelance newspaper cartoonist, esthetician, electrologist, manicurist, barber, or cosmetologist that meet certain criteria;
  • Relationships between a contractor and an individual performing work pursuant to a subcontract in the construction industry that meet certain criteria;
  • Relationships between a referral agency and a service provider that uses the referral agency to connect with clients that meet certain criteria; and
  • Bona fide business-to-business contracting relationships that meet certain criteria.

For everyone else, now is the time to make some tough decisions and weigh the legal, technical, and financial implications of compliance with the new law, which provides for retroactive enforcement.  To avoid facing potential liability for misclassification, hiring entities should consider whether: (1) certain categories of workers or business relationships are exempt; (2) it makes sense to proactively reclassify some or all current independent contractors as employees; or (3) restructuring business operations could result in compliance with the ABC test.  We recommend that you contact your California employment counsel for further guidance.

But it’s not just California employers who are facing “an existential threat” (as the Pacific Research Institute calls it).  For example, “New Jersey has been cracking down hard on the gig economy” and aims to pass a bill that would proclaim all state workers to be employees, with just a few exceptions.  Described as a “policy Petri dish,” analysts expect that other states like New York, Washington, Oregon, and Illinois will follow California’s lead.

Meanwhile, gig-reliant and ride-share business are expected to be most impacted by the new law.  It’s no secret that the primary motivating factor for the legislature’s passing AB 5 was to hand Sacramento’s labor union benefactors a vast new group of potential dues-paying union members.  After all, the bill’s author, California State Assemblywoman Lorena Gonzalez is the former CEO and Secretary-Treasurer of the San Diego and Imperial Counties Labor Council, AFL-CIO, and she received almost 33 percent of all of her campaign contributions last year from organized labor.

In response, Uber, Lyft, and DoorDash have teamed up to put a voter initiative on the ballot called the “Protect App-Based Drivers and Services Act,” pledging to spend at least $110 million dollars to help convince voters next November that AB 5 should be amended to protect the rights of app-based rideshare and delivery workers who want to work as independent contractors. The ballot measure would protect worker flexibility and independence; require delivery service companies to offer new protections and benefits for drivers, including wage and benefit guarantees; and implement new customer and public safety protections.

But what about other freelance workers who do not qualify for job or industry/sector exemptions and who lack the political clout or financial resources necessary to fight for their right to make their own hours, set their own schedule, or work multiple jobs simultaneously?  Unfortunately, there aren’t a lot of others options right now.  We will keep you apprised of any developments.

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Photo of Tony Oncidi Tony Oncidi

Anthony J. Oncidi is the co-chair of the Labor & Employment Law Department and heads the West Coast Labor & Employment group in the firm’s Los Angeles office.

Tony represents employers and management in all aspects of labor relations and employment law, including…

Anthony J. Oncidi is the co-chair of the Labor & Employment Law Department and heads the West Coast Labor & Employment group in the firm’s Los Angeles office.

Tony represents employers and management in all aspects of labor relations and employment law, including litigation and preventive counseling, wage and hour matters, including class actions, wrongful termination, employee discipline, Title VII and the California Fair Employment and Housing Act, executive employment contract disputes, sexual harassment training and investigations, workplace violence, drug testing and privacy issues, Sarbanes-Oxley claims and employee raiding and trade secret protection. A substantial portion of Tony’s practice involves the defense of employers in large class actions, employment discrimination, harassment and wrongful termination litigation in state and federal court as well as arbitration proceedings, including FINRA matters.

Tony is recognized as a leading lawyer by such highly respected publications and organizations as the Los Angeles Daily JournalThe Hollywood Reporter, and Chambers USA, which gives him the highest possible rating (“Band 1”) for Labor & Employment.  According to Chambers USA, clients say Tony is “brilliant at what he does… He is even keeled, has a high emotional IQ, is a great legal writer and orator, and never gives up.” Other clients report:  “Tony has an outstanding reputation” and he is “smart, cost effective and appropriately aggressive.” Tony is hailed as “outstanding,” particularly for his “ability to merge top-shelf lawyerly advice with pragmatic business acumen.” He is highly respected in the industry, with other commentators lauding him as a “phenomenal strategist” and “one of the top employment litigators in the country.”

“Tony is the author of the treatise titled Employment Discrimination Depositions (Juris Pub’g 2020; www.jurispub.com), co-author of Proskauer on Privacy (PLI 2020), and, since 1990, has been a regular columnist for the official publication of the Labor and Employment Law Section of the State Bar of California and the Los Angeles Daily Journal.

Tony has been a featured guest on Fox 11 News and CBS News in Los Angeles. He has been interviewed and quoted by leading national media outlets such as The National Law JournalBloomberg News, The New York Times, and Newsweek and Time magazines. Tony is a frequent speaker on employment law topics for large and small groups of employers and their counsel, including the Society for Human Resource Management (“SHRM”), PIHRA, the National CLE Conference, National Business Institute, the Employment Round Table of Southern California (Board Member), the Council on Education in Management, the Institute for Corporate Counsel, the State Bar of California, the California Continuing Education of the Bar Program and the Los Angeles and Beverly Hills Bar Associations. He has testified as an expert witness regarding wage and hour issues as well as the California Fair Employment and Housing Act and has served as a faculty member of the National Employment Law Institute. He has served as an arbitrator in an employment discrimination matter.

Tony is an appointed Hearing Examiner for the Los Angeles Police Commission Board of Rights and has served as an Adjunct Professor of Law and a guest lecturer at USC Law School and a guest lecturer at UCLA Law School.