PPB March 2020

A ssembly Bill 5 (AB5), which addresses employee classification, became law in California on January 1, 2020. This law implements a new test for employers to use to determine if a worker is an independent contractor for the purposes of the Labor Code, Unemployment Insurance Code and the Industrial Welfare Commission (IWC) wage orders. The law also applies to Workers’ Comp coverage as of July 1, 2020. AB5 sets a new “ABC Test” for determining a worker’s independent contractor status, which is intended to be easier andmore predictable for employers and workers. Under the new law, a worker is considered an “employee” unless they meet all three conditions to be classified as an independent contractor. The three conditions are: A The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; and B The worker performs work that is outside the usual course of the hiring entity’s business; and C The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed. The new law assumes California workers are employees unless they pass a test that classifies them as independent contractors. by Claudia St. John, SPHR, SHRM-SCP and Paige McAllister, SPHR, SHRM-SCP Understanding California’s New Independent Contractor Law 92 | MARCH 2020 | THINK