{"id":2086,"date":"2019-10-22T17:17:36","date_gmt":"2019-10-22T21:17:36","guid":{"rendered":"https:\/\/www2.law.temple.edu\/10q\/?p=2086"},"modified":"2019-10-22T17:17:36","modified_gmt":"2019-10-22T21:17:36","slug":"changes-for-ca-gig-economy-know-your-abcs","status":"publish","type":"post","link":"https:\/\/law.temple.edu\/10q\/changes-for-ca-gig-economy-know-your-abcs\/","title":{"rendered":"Changes for CA Gig Economy: Know Your ABCs"},"content":{"rendered":"<p>A new California law, stemming from\u00a0<a href=\"http:\/\/leginfo.legislature.ca.gov\/faces\/billNavClient.xhtml?bill_id=201920200AB5\">Assembly Bill 5<\/a>\u00a0(AB 5), expands and codifies the California Supreme Court\u2019s 2018 decision in\u00a0<em>Dynamex Operations West Inc. v. The Superior Court of Los Angeles<\/em>. Under\u00a0<em>Dynamex,<\/em>\u00a0workers were presumed to be employees unless the company could show, pursuant to a three-factor test called the ABC test, that the workers were, in fact, independent contractors.<\/p>\n<p>The\u00a0<em>Dynamex<\/em>\u00a0decision only applied the ABC test to the wage orders issued by the Labor Commissioner. AB 5, by contrast, is broader and will apply to the entire California Labor Code and the California Unemployment Insurance Code. This statute does not change the tests for determining worker status in matters of discrimination and retaliation under the California Fair Employment and Housing Act, workers compensation benefits, or other areas of employment law.\u00a0The new law, which will take effect January 1, 2020, could have unforeseen consequences because a worker may need to be classified as an employee for wage and hour purposes, but could not be covered for workers compensation benefits or other benefits.<\/p>\n<p>The ABC test specifies that in order to prove a worker is an independent contractor and overcome the presumption that the individual is an employee, the company has to prove:<\/p>\n<ul>\n<li>The individual is free from the control and direction of the company in connection with the performance of the work, both under the contract for the performance of the work and in fact.<\/li>\n<li>The individual performs work that is outside the usual course of the company\u2019s business.<\/li>\n<li>The individual is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the company.<\/li>\n<\/ul>\n<p>The law also says that in those instances where the ABC test cannot be properly applied, the nine-factor test laid out in the California Supreme Court\u2019s decision in\u00a0<em>Borello &amp; Sons, Inc. v. Department of Industrial Relations<\/em>\u00a0will apply. The multi factor test focuses on the right to control. The law does not clarify when the ABC test could not be \u201cproperly applied.\u201d Finally, AB 5 includes carve-outs for several professions\u2014including but not limited to doctors, accountants, real estate agents, and architects\u2014where\u00a0the\u00a0<em>Borello<\/em>\u00a0test, rather than the\u00a0<em>Dynamex<\/em>\u00a0test, will apply.<\/p>\n<p>AB 5 may also greatly expand the number of individuals who are eligible for employee benefits in California. Employers may be required to consider making benefit plan changes to clarify what definition of \u201cemployee\u201d they will use and assess whether their administrative systems need updates or changes if they choose to use multiple definitions of \u201cemployee\u201d for eligibility purposes. Employers would then need to determine if AB 5 requires them to extend coverage to all or part of this new employee population under company medical plans, 401(k) plans, severance, vacation, and FMLA. The costs of these additional benefits could be significant.<\/p>\n<p>Although extending benefits coverage to this new employee population could be a significant financial burden, the costs of non-compliance could be higher. Intentional violations can result in civil fines of $10,000 to $25,000 per misclassified worker, along with back pay and other penalties<\/p>\n<hr \/>\n<p><em>An <\/em><a href=\"https:\/\/www.ballardspahr.com\/alertspublications\/legalalerts\/2019-09-23-changes-for-ca-gig-economy-learn-your-abcs\"><em>earlier version<\/em><\/a><em> of this article was originally published on Ballard Spahr\u2019s Alerts &amp; Publications. <\/em><\/p>\n<p><em>Brian M. Pinheiro, Practice Leader of\u00a0Ballard\u00a0Spahr\u2019s Employee Benefits and Executive Compensation Group and past Chair of the firm&#8217;s Business and Transactions Department, advises employers on health and welfare benefit plans, retirement plans, and executive compensation. He is based in Philadelphia and spent more than a decade as an adjunct professor at Temple Law.<\/em><\/p>\n<p><em>Diane A. Thompson, a\u00a0<\/em>Ballard<em>\u00a0Spahr Partner based in the firm\u2019s Los Angeles office, advises public and private companies and tax-exempt organizations on employee benefits and executive compensation matters.<\/em><em>\u00a0<\/em><\/p>\n<p><em>Christopher J. Kelly is Of Counsel in\u00a0<\/em>Ballard<em>\u00a0Spahr&#8217;s New Jersey office. He has represented both public and private employers in a range of litigated matters, including wage and hour, harassment, discrimination, whistleblower, breach of contract, unfair competition, and wrongful termination matters in state and federal courts across the country.<\/em><\/p>\n<p><em>Jessica G. Federico is a Labor and Employment associate in the firm\u2019s Minneapolis office.<\/em><\/p>\n<p><em>Stephanie Awanyai, based in Los Angeles, is an associate in\u00a0Ballard\u00a0Spahr\u2019s Litigation Department.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The U.S. District Court for the Southern District of New York has held that the Federal Arbitration Act preempts state laws that prohibit mandatory arbitration of sexual harassment claims.<\/p>\n","protected":false},"author":5,"featured_media":2092,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31,70],"tags":[1407,1408,1409,1410,1411,1412,1413,1414,1415,1416,168,1417,1418,1419,293,169,1420,1421,1422,1423,1395,1424,1425,1426,1427],"coauthors":[1402,1403,1404,1405,1406,2],"class_list":["post-2086","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-contracts","category-labor-and-employment","tag-401k","tag-ab-5","tag-abc-test","tag-assembly-bill-5","tag-borello-sons","tag-california-fair-employment-and-housing-act","tag-california-labor-code","tag-california-law","tag-california-unemployment-insurance-code","tag-contractors","tag-discrimination","tag-dynamex","tag-dynamex-operations-west-inc-v-the-superior-court-of-los-angeles","tag-eligibility","tag-employment","tag-employment-law","tag-fmla","tag-inc-v-department-of-industrial-relations","tag-independent-contractor","tag-labor-commissioner","tag-retaliation","tag-severance","tag-vacation","tag-wage-orders","tag-workers-compensation","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Changes for CA Gig Economy: Know Your ABCs - The Temple 10-Q<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/law.temple.edu\/10q\/changes-for-ca-gig-economy-know-your-abcs\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Changes for CA Gig Economy: Know Your ABCs - The Temple 10-Q\" \/>\n<meta property=\"og:description\" content=\"The U.S. District Court for the Southern District of New York has held that the Federal Arbitration Act preempts state laws that prohibit mandatory arbitration of sexual harassment claims.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/law.temple.edu\/10q\/changes-for-ca-gig-economy-know-your-abcs\/\" \/>\n<meta property=\"og:site_name\" content=\"The Temple 10-Q\" \/>\n<meta property=\"article:published_time\" content=\"2019-10-22T21:17:36+00:00\" \/>\n<meta name=\"author\" content=\"Brian M. 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