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Independent Contractor Follow-Up: Codifying Dynamex in Assembly Bill 5

I recently posted about the application of the California Supreme Court's decisions when considering independent contracting and IP transfer situations. On September 11, 2019, California lawmakers passed Assembly Bill 5 (AB5), and thus took the penultimate step of entering the Dynamex decision into California's Labor Code. The bill now heads to Gov. Newsom for review and approval as law (as of Sep. 13, 2019).

A helpful summary and the annotated text of the proposed change to the California Labor Code itself can be reviewed HERE. The important points are:

"Employee" Status is Default Under Dynamex/Wage Order (IWC) Occupations

Under the CA Labor Code, Unemployment Insurance Code, and wage order cases from teh IWC, a worker is considered an employee - rather than an independent contractor - unless the hiring entity demonstrates all of the following:

  • worker is free from the control and direction of the hiring entity;
  • worker performs work outside the usual course of the hiring entity’s business; and
  • worker is customarily engaged in an independently occupation of the same nature as that involved in the work they performed.

Multi-Factor Bollero Test Would Apply to Non-Dynamex/IWC Occupations

The blanket recognition of "employee" versus "independent contractor" (baring cases with the 3-part exception above), does not apply to these jobs, and instead the multi-factor Bollero test applies:

  • Production Agencies, Surplus Line Brokers, and Life & Disability Analysts under the CA Insurance Code
  • Licensed Physicians, Surgeons, Dentists, Podiatrists, Psychologists, and Veterinarians
  • Active licensed attorneys, architects, engineers, private investigators, and accountants
  • SEC/FIRA/CA registered securities broker-dealers and investment advisers
  • Direct Sales Salespeople
  • Commercial Fisherman working on an American Vessel
  • Workers under contract for "Professional Services" (creative marketing, HR administration, travel agents, graphic design, grant writing, fine art, work requiring IRS-licensing, payment processing, photography with less than 35 licenses to that employer per year and excluding motion pictures, freelance writing with less than 35 licenses to that employer per year, licensed esthetician/electrologist/manicurist/barber/cosmetologist services, where - (A) the worker maintains a business location; (B) the worker has a business license; (C) the worker can set their own rates; (D) outside of completion dates, the worker can set their hours; (E) the worker is customarily engaged in an independently occupation of the same nature as that involved in the work they performed; (F) the worker exercises discretion in performing the work.
  • Real Estate Licensees
  • Repossession Agencies
  • Bona Fide Business-to-Business Contracting Relationship
  • Subcontractor workers in the construction industry
  • "Referral Agency" Service Providers under certain conditions
  • "Motor Club" Service Providers under certain conditions

Clearly, the proposed law has many facets that require careful consideration. Hiring entities should review these points with their counsel before making any HR decisions.

Written by
Jayson Sohi
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