AB5, the bill that sprang forth from the jaws of the Dynamex decision, and that will change the test for worker misclassification as well as the landscape for independent contractors in California, is poised to land on the Governor’s desk for signature next month. Governor Newsom has given his support to the bill, so absent last-second maneuvers, it will become law.
After passing the California Senate, the days of a multi-factored and time-tested exam for worker classification grow short, as the ABC Test will take center stage per AB5. As you recall if you’ve been reading this blog, the ABC Test has three prongs, all of which must be satisfied, in order to prove proper IC classification. The burden is on the client company to prove all three.
Of particular dread, if you’re a company engaging ICs, is the B Prong. This prong requires companies to show that the work performed by the IC is outside of the normal course of the client company’s business. In California, long known as a cradle of innovation, disruption and ideation, the company that only does one thing over its corporate lifetime is an anachronism. And the days of your business’s sole interaction with ICs coming in the form of a plumber coming around to fix a leaky pipe is flat-out ludicrous.
Where does that leave businesses that scale and capture market share based on IC-engagement in CA? How about companies that are well-established and proven?
While your ultimate decisions will be based on your company’s needs, if the plan involves doing business in CA, and leveraging ICs, prepare for the ABC Test when the calendar turns to 2020. Understand also that while lobbying efforts will continue to request exemptions for certain job categories, you shouldn’t hold out hope waiting for one of them to apply to your ICs. The most prudent move is to comply with ABC and watch spaces like this for further updates. No doubt that judicial interpretations will come as ABC is litigated, and those interpretations will shed light on questions over the breadth of ABC and nerve-wracking questions such what ordinary course of business actually means.
P.S. – TalentWave has a Health Check designed to do exactly what California companies need to do to mitigate their risk. We deliver a thorough assessment of your business’ independent worker population that provides visibility into your existing contingent labor spend and worker classification. Learn more!