Last week Governor Newsom signed Assembly Bill No. 5 (AB-5).  AB-5 presumes that any person who performs work for a hirer is an employee and not an independent contractor.  The presumption created by AB-5 has existed in case law since the California Supreme Court decided Dynamex Operations West Inc. v. Superior Court of Los Angeles, 4 Cal.5th 903 (2018) (Dynamex) in April 2018.  AB-5 codifies the Dynamex decision and expands its application.  Below are five things to know about AB-5:

• AB-5’s presumed employee status applies to work performed on or after July 1, 2020;
• To rebut the presumption that a worker is an employee, the hirer must demonstrate all of the following: (A) the worker is free from the control and direction of the hirer in regards to the worker’s performance – both contractually and actually; (B) the worker performs work outside the usual course of the hirer’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed (Dynamex Test);
• Labor Code section 2750.3 carves out a number of professions that are exempted from the presumption, including commercial fisherman, insurance agents, medical professionals, licensed professionals (i.e., attorneys, engineers, etc.), and financial advisors;
• AB-5’s employee presumption applies to provisions of the Labor Code, the Unemployment Insurance Code, and to Industrial Wage Commission (IWC) wage orders that define employ as “to engage, suffer, or permit to work,” (note: this includes IWC Order 14-2001 regulating agricultural occupations); and
• AB-5 redefines the definition of “employee” for purposes of the California Employment Development Department’s Unemployment Insurance program, increasing the categories of persons who are eligible to receive benefits from such program.

For questions or additional information on AB-5 please contact Alyson E. Ackerman (aackerman@somachlaw.com) or Alexis K. Stevens (astevens@somachlaw.com).

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