California Governor Newsom Signs AB 5 Into Law, Effective January 1, 2020

On September 18, California Governor Gavin Newsom signed AB 5 into law, and the new law will become effective on January 1, 2020. AB 5 codifies the "ABC test" from the landmark Dynamex case to determine whether a service provider is an independent contractor or employee.

AB 5 adds section 2750.3 to the California Labor Code, which expressly adopts the ABC test set forth in Dynamex for purposes of the Labor Code, Unemployment Insurance Code and the Wage Orders.

Immediate reaction and recommendations

As mentioned in our previous alert, this is not cause for panic. The California courts already changed the independent contractor test for California service providers with the Dynamex decision, and with AB 5, the test is being expanded to claims under the Labor Code and Unemployment Insurance Code, rather than only claims under the Wage Orders. There are specific exemptions to the ABC test for which the old Borello standard would still apply. Companies should evaluate their independent contractor classifications for California service providers in light of the new law.

Please feel free to contact us with any questions about AB 5 or any questions regarding worker classification matters.

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