Since implementation of California’s Assembly Bill 5 (AB5), a law that potentially reclassifies millions of independent contractors as employees, there have been several significant developments. Therefore, this is intended as a general guide to help you begin to navigate the business landscape impacted by this evolving law. As always, though, you are advised to consult with an experienced business attorney about the specifics of your case.

Deciphering AB5’s Current Stand: What’s Changed?

AB5, implemented in January 2020, expanded the California Supreme Court’s 2018 decision in Dynamex Operations West, Inc v. Superior Court. The court established the “ABC” test to determine if a worker could be classified as an independent contractor. Under this test, a worker is considered an independent contractor if the following are true:

1. The worker is free from the control and direction in the performance of services;
2. The worker performs work outside the usual course of the hiring company’s business;
3. The worker is customarily engaged in an independently established trade, occupation, or business.

Key Developments Surrounding AB5

AB5’s journey so far demonstrates how fluid and complex employment issues can be, particularly with respect to independent contractor classification. Some notable events and rulings since AB5 became law include:

• Retroactive Application: In January 2021, the California Supreme Court held that the Dynamex decision applies retroactively to independent contractor classification claims pre-dating Dynamex.
• Federal Preemption and Motor Carriers: Initially, motor carriers challenged AB5’s application to their industry and were granted a preliminary injunction. However, in 2021, the 9th Circuit panel ruled that AB5’s application to motor carriers wasn’t preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA). The U.S. Supreme Court upheld this ruling in 2022, meaning AB5 applies to motor carriers in California.
• First Amendment Challenge: In 2022, the 9th Circuit ruled that AB5’s application to independent contractors didn’t violate the First Amendment, rejecting a company’s claim that applying AB5 to individuals gathering political signatures infringed on their free speech rights.
• Proposition 22: In 2020, Californians approved Proposition 22, allowing app-based ride-share and delivery driver companies to hire drivers as independent contractors if certain conditions are met. This year, the California Court of Appeal upheld Proposition 22, rejecting challenges.
• Exemption Legislation: Since AB5’s inception, several bills have exempted certain professions from the “ABC” test, including newspaper distributors, manicurists, and construction trucking subcontractors.

AB5’s journey demonstrates how fluid and complex employment issues can be, particularly with respect to independent contractor classification. And, the situation is expected to continue to evolve with new cases giving rise to additional judicial interpretations.

Allow Coepio Legal to Guide You

Remember, you don’t have to face these legal issues and attempt to interpret AB5, alone. Our team at Coepio Legal is here to help you understand and navigate these new developments.

We would welcome the opportunity to assist you in understanding the current state of AB5 and its implications on your business. For a free consultation, call our office at 415-323-6212