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2020 Rings in Legislative Changes for California
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With the New Year, California rings in a lot of legislative changes, including a new standard for evaluating independent contractor classifications. Here is what you need to know: Independent Contractors Effective Jan. 1, 2020, Assembly Bill 5 (AB-5) became law in California by adding section 2750.3 to the Labor Code. AB-5 is the legislative response to the California Supreme Court decision in Dynamex v. Superior Court, which adopted a new three-part standard (the “ABC test”) for determining a contractor’s status under California’s Wage Orders. Before Dynamex, companies used the eleven-part test set forth by the Supreme Court in Borello v. Department of Industrial Relations, which primarily focused on whether the contractor controlled the manner and means of performing the work. Through AB-5, the legislature codified the holding in Dynamex and expanded it to also include claims brought under the California Labor Code and Unemployment Insurance Code. Unless an exception applies, a worker cannot be classified as an independent contractor in California unless the hiring entity can show all of the following:
Exceptions The ABC test does not apply to a number of occupations. Where an exception applies, the working relationship between the hiring entity and worker will be analyzed under the eleven-factor Borello test. The ABC test does not apply to the following occupations:
An exception for construction subcontractors also exists if the following criteria are met:
Finally, a business-to-business exception exists when:
In light of these significant changes, employers are encouraged to review their independent contractor agreements and relationships to determine whether any of them need to be reclassified in 2020. If you have any questions regarding the above information, please contact your Dinsmore labor and employment attorney.
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