Today’s workplace has become increasingly regulated and complex. Employers have started to recognize the importance of complying with misclassification statutes, and are trying to educate their executives on the process.
In determining whether a worker is an employee or an independent contractor, courts in California generally apply the common law test under which the employer’s right to control the manner and means by which the employee’s work is accomplished, rather than the amount of control actually exercised, is the principal factor in assessing whether a plaintiff is an employee or an independent contractor.
On September 18, 2019, California Governor Gavin Newsom signed Assembly Bill 5 (“AB5”) into law. Thus, California businesses will soon face new challenges in their use of independent contractors. AB5 raised the bar for companies that otherwise might rely on freelance or contract workers. The new law establishes stricter criteria, known as the “ABC test”, to maintain a worker as an independent contractor. Specifically, a business must prove that:
- The worker is free from the company’s control.
- The duties performed by the worker are not central to the company’s core business.
- The worker is customarily engaged in an independently established business, trade, or industry.
Workers that do not satisfy all three criteria will be reclassified as employees, which could allow them to start earning a minimum wage and qualify for overtime pay, paid sick leave, and health insurance benefits.
AB5 is landmark legislation for gig economy workers and employers in California. Yet, the passing of AB5 does not mean that gig economy workers in California who were categorized as independent contractors are now automatically employees. They will still need to challenge their employers in court to apply the ABC test and reclassify them.
If you need help with your questions about employee and independent contractor categorization, feel free to schedule a consultation with an attorney using this link or calling our office at 323.543.4453.
Judy Yen graduated from Loyola Law School, Los Angeles in May 2019. Born and raised in Taiwan, Judy grew up in a family of artists and entrepreneurs who fostered her passion for art and business.
In law school, Judy was a member of the Loyola Fashion Law Clinic and the Transactional Negotiation Team. Last summer, Judy worked for Paul Hastings LLP in their Shanghai office, where she gained valuable experience in international corporate law, including working on two IPO projects. She received her bachelor’s degree in Political Science and Accounting from the University of California, Los Angeles. She is a native speaker of Mandarin Chinese.
Judy is an avid foodie who loves to both explore cool restaurants and try new recipes at home. She also likes oil painting, swimming, and hiking.