# AB 5 and the Independent Contractor

- Link: https://www.lumlawgroup.com/ab-5-and-the-independent-contractor/
- Published: 2020-02-12T09:19:08-08:00
- Author: Albert J Lum

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## AB 5 and the Independent Contractor

In December 2019, the Governor of California, Gavin Newsom, signed into law Assembly
Bill 5, which drastically changes how most businesses classify independent contractors.
A worker is more likely to be classified as an employee instead of an independent
contractor. Although the impetus for this law was to give more employment benefits
to ride sharing, delivery, and “gig economy” workers, its impact is much more far
reaching.  The law codifies a California Supreme Court decision, _Dynamex Operations
West v. Superior Court of Los Angeles_ (_Dynamex_) and alters the application of
a 20 year old law.

In essence, there is now a 3-part test to determine if a worker is an employee or
an independent contractor (the “ABC test”):  

**(A) The hiring entity does not control or direct the performance of work;**

**(B) The person performs work outside the usual course of the hiring entity’s business;
and**

**(C) The person is customarily engaged in an independently established trade, occupation
or business.**

If all these 3 conditions are met, a worker may be classified as an independent 
contractor.  If not, the worker is an employee. Some exceptions have been made to
the application of this new law, mostly for licensed professionals, such as doctors,
lawyers, real estate professionals, broker dealers, etc.  As stated, although this
was intended to target the above mentioned workers, many businesses that have hired
independent contractors to do part time work, such as bookkeepers, free lance journalists,
etc., would be forced to classify these individuals as employees even though they
do not solely work for the business.  The law is new and vague, and there are already
legal challenges being raised and amendments and other changes being proposed, but
for now employers, especially small businesses, must be even more careful of their
hiring practices while the law is interpreted and its parameters are (hopefully)
defined in more detail.

See The Daily Recorder – **[https://www.law.com/therecorder/2019/09/19/ab-5-changing-the-landscape-for-independent-contractor-analysis/?slreturn=20200109121407](https://www.law.com/therecorder/2019/09/19/ab-5-changing-the-landscape-for-independent-contractor-analysis/?slreturn=20200109121407)**