Although Assembly Bill 5 took effect on Jan. 1, 2020, codifying worker classification once and for all, there are two bills pending before the California legislature that would modify the controversial law.
AB 5 distinguishes independent contractors from employees unless an exception exempts a worker. For example, physicians, freelance writers, dentists, dog walkers, podiatrists, psychologists, CPAs, construction trucking services, veterinarians, and newspaper carriers are all exempt from being classified as employees.
“There's very little in common in a lot of these exceptions,” said Bruce Sarchet, an attorney with Littler law firm in Sacramento. “What do dog-walkers have in common with a CPA? There's little rhyme or reason to it. Some of these have historically been independent contractors like outside salespeople but it’s hard to tell there.”
Currently pending is AB 1561, which extends two exceptions that were were due to expire on January 1, 2022. If passed, AB 1561 will allow estheticians, manicurists, barbers, and cosmetologists to enjoy independent contractor status for another three years until Jan. 1, 2025.
“The appetite for changing AB 5 seems to have gone away and it looks like we're going to be pretty much set with what we've got,” Sarchet told the Southern California Record.
The three-pronged 'ABC' test, which determines whether a worker is an employee or not is considered stringent, according to critics. Most don’t qualify to be categorized as independent contractors unless their position is listed under an exception, such as those listed in AB 1561.
“If AB 1561 passes, it doesn't mean these people are contractors,” Sarchet said. “It means we use the old test to determine whether or not they're contractors and the old test is more lenient. It focuses on the 'A' prong of the ABC test, which is the right to control the manner and means by which the task is accomplished. There are a number of secondary factors but the primary factor is the 'A' prong and the right to control.”
There were already 41 exceptions under AB 5 and another 26 in AB 2257, which was signed into law by Gov. Gavin Newsom last year in September.
Sarchet decries the California legislature for failing to take into account the transformation that has occurred in the economy and the creativity and innovation, which led to new work opportunities in the gig economy.
“Consumers love the gig economy and the legislature passes this bill saying you can't have these kinds of jobs that way and you have to go back to an industrial revolution model of work where you report to a boss and stay there all day until the whistle blows,” he said.
SB 805 is another proposal that’s pending. If approved SB 805 would apply to small nonprofit performing arts organizations.
“Workers are employees but this legislation would allow these small nonprofits to avoid some of the costs of having to have employees as opposed to contractors,” he said.
AB 1561 started in the Labor and Employment Committee and is currently pending in the Assembly Appropriations Committee where its April 21 hearing was postponed.
SB 805 passed the Senate Labor, Public Employment, and Retirement Committee and is now pending with the Committee on Appropriations.
“All of the appetite and energy to really reform AB 5 that was around in the last legislative session in 2020 is gone,” Sarchet said. “The legislature, the policymakers are moving on to other issues because last year it took up a lot of time to talk about AB 5. This year, not so much. So the law is settling in.”