Today, September 18, 2019, AB5 was signed into CA law by the Governor. AB5 embraces and codifies the so called “ABC Test” from the California Supreme Court decision of Dynamex Operations West, Inc. v. Superior Court of Los Angeles (April 30, 2018) as the proper CA test for determining if a worker may be classified as an independent contractor or as an employee, and also exempts some specific types of professions and businesses from the ABC Test.
The ABC test, in a nutshell, provides that a worker must be classified as an employee unless all three of the following tests are satisfied: (A) The person 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; (B) The person performs work that is 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 of the same nature as that involved in the work performed. The B-Test has been the most controversial and has caused many former independent contractors to no longer be able to be properly classified as such.
AB5 provides for five groups of professionals and businesses who are exempt from the ABC Test. What test will be used to determine whether a worker may be classified as an independent contractor or as an employee depends on which grouping the professional or business is included in. Some groupings will be subject to the Borello Test, which is a multi-factor balancing test that has been used for decades to determine if a worker can be classified as an independent contractor or as an employee. The Borello Test’s most important factor is similar to the A-Test of the ABC Test, that is, freedom from control and direction. There are other factors too, but no one factor is necessarily determinative of the outcome. The Borello Test, unlike the ABC Test, is subject to subjectivity and interpretation. Other groupings will be subject to multi-factor tests actually specified in AB5.
Here is a list of professionals who are granted exemptions from the ABC Test in AB5: CA licensed Physicians, CA licensed Surgeons, CA licensed dentists, CA licensed podiatrists, CA licensed psychologists, CA licensed insurance agents, SEC registered or FINRA or CA licensed financial advisors, CA licensed lawyers, CA licensed private investigators, CA licensed accountants, CA licensed engineers, CA licensed veterinarians, direct sellers, commercial fishermen, marketing professionals, human resources administrators, travel agents, graphic designers, grant writers, fine artists, U.S. Treasury Department licensed enrolled agents, payment processing agents through independent sales organizations, photographers (who don’t work in motion pictures, and who don’t submit more than 35 times per year to the same employer), photojournalists (who don’t work in motion pictures, and who don’t submit more than 35 times per year to the same employer), freelance writers (who don’t submit more than 35 times per year to the same employer), freelance editors (who don’t submit more than 35 times per year to the same employer), freelance newspaper cartoonists (who don’t submit more than 35 times per year to the same employer), CA licensed hairstylists and barbers, CA licensed estheticians, CA licensed electrologists, CA licensed cosmetologists, CA licensed real estate licensees (e.g., loan brokers and real estate agents), CA licensed repossession agents, and some CA licensed individuals performing work under subcontracts in the construction industry.
Also, AB5 provides a test for determining independent contractor status in a bona-fide business-to-business relationship. The conditions that must be met for independent contractor status are (all must be true):
(A) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.
(C) The contract with the business service provider is in writing.
(D) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.
(E) The business service provider maintains a business location that is separate from the business or work location of the contracting business.
(F) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.
(G) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.
(H) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.
(I) The business service provider has no other financial relationships with the contracting business.
(J) The business service provider can negotiate its own rates.
(K) The business service provider can set its own hours and location of work.
(L) The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required.
AB 5 also discusses when a relationship between a referral agency and a referred professional may be one of independent contractor and not employee.
AB5 will become effective on January 1, 2020, but its provisions will be apply retroactively to existing claims and actions filed before its effective date. Moreover, Section 6 of AB5 provides: “No provision of this measure shall permit an employer to reclassify an individual who was an employee on January 1, 2019, to an independent contractor due to this measure’s enactment.” Section 6 will no doubt be troubling to many employers who otherwise will find relief in the provisions of AB5.
–Adam K. Treiger, Esq.
Category: Employment Law
The following are summaries of new employment laws passed by the California legislature, and signed by the Governor, at the end of September, 2018.
SB 1343 — Employers with 5 or more employees, including part time, temporary and seasonal employees, must give anti-harassment and anti-discrimination training to all of their employees (supervisory and non-supervisory) shortly after they are hired and every 2 years thereafter.
SB 1300 – It is an unlawful practice to give an employee a raise or bonus as consideration for their signature (i) on a release of their claims under the Fair Employment and Housing Act (e.g., discrimination, harassment, retaliation, etc.); or (ii) on a non-disparagement agreement that would prevent disclosure of unlawful acts in the workplace.
SB 820 – Confidentiality and non-disparagement provisions in settlement agreements of sexual harassment and discrimination lawsuits are void, unless such provisions are included at the request of the claimant to protect the claimant’s identity.
AB 2770 – Adds to the list of communications that are privileged, and thus not subject to defamation liability, statements to a potential new employer of a former employee, made without malice, regarding whether or the employer would not rehire the former employee because the employer determined such employee was involved in sexual harassment.
AB 2282 – Clarifies that employers may ask applicants for their “salary expectation” for the position for which they are applying. Also, clarifies that employers may make salary decisions so long as the differential in salary between workers of different genders or different races are justified by specified business factors, including a seniority system, a merit system or their education, training or experience.
AB 1976 – Employers must reasonably accommodate lactating employees by providing a private room other than a bathroom (former law required a private area other than a toilet stall).
–Adam K. Treiger, Esq.
On February 8, 2018, the U.S. District Court for the Northern District of California held, in the case of Lawson v. Grubhub, Inc., that a former Grubhub delivery driver was not an employee, as the driver claimed, but rather was properly classified as an independent contractor. The test for whether a worker is an employee or an independent contractor is found in S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341. The main thrust of the Borello test is whether and to what extent the “employer” controls the manner and means of the worker’s work. The Court in Lawson v. Grubhub decided that Grubhub did NOT sufficiently control Larson’s work for a classification as independent contractor to be improper because: (i) Grubhub did not direct or control the details of how Larson did his job, (ii) Grubhub did not control Lawson’s dress or hygiene while working, (iii) Grubhub did not train Lawson, (iv) Grubhub did not control whether, when and for how long Lawson worked, (v) Grubhub did not control how and when Lawson delivered the restaurant orders he chose to accept, and (vi) Grubhub did not evaluate Lawson’s work performance.
–Adam K. Treiger
Earlier this week, Governor Brown signed the Immigrant Worker Protection Act into law. Under the law, an employer may not provide federal immigration enforcement agents access to their business without a warrant (other than to ascertain if they…
On October 15, 2017, Governor Brown signed SB 396. The California Fair Employment and Housing Act already requires employers with 50 or more employees to provide at least 2 hours of training regarding sexual harassment to all supervisory…
On October 14, 2017, Governor Brown signed AB 1008 into law, requiring most employers with 5 or more employees, before denying an applicant a position of employment solely or in part because of the applicant’s conviction history, to make an…
On October 12, 2017, Governor Brown signed AB 168, prohibiting employers from relying on the salary history information of an applicant for employment as a factor in determining whether to offer an applicant employment or what salary to offer an…
On October 12, 2017, Governor Brown signed SB-63, which forces employers to grant to employees with more than 12 months of service with the employer, who have at least 1,250 hours of service with the employer during the previous 12-month period…
I have previously blogged about the California Private School Teachers Exemption, which exempts certain private school teachers from overtime, from keeping track of their time, and from mandatory meal and break periods. See Cal. Labor Code…
In the recent California Supreme Court case of Mendoza v. Nordstrom, Inc., the court was asked by the 9th Circuit to clarify the meaning of Cal. Labor Code section 552, which prohibits an employer from “causing his employees to work more than six…
L.A. City and County minimum wage goes up on July 1, 2017 to $10.50/hr. for employers with 25 or fewer employees, and to $12.00/hr. for employers with 26 or more employees. Any employee who works 2 or more hours in a 7 day week in L.A. must be…
The Court held that an employer is not liable for injuries caused by an employee’s auto accident on a commute under the going and coming rule. The plaintiff argued that the exceptions to the going and coming rule should apply, namely, the..
CA Court of Appeal held that paying a non-exempt commissioned employee a draw against future commissions may deprive such workers of their paid rest breaks. The court held that a draw is a loan, and a loan is not a wage and is subject to…
• Employers of any size must provide paid sick leave to all employees who work in California for 30 or more days within a year. This includes full time, part time, and temporary employees.
• Paid sick leave accrues at the minimum rate of one hour per every 30 hours worked, paid at the employee’s regular wage rate. That equates to approximately 5.3 hours per month (or 63.6 hours per year) for employees who work 40 hours a week.
• Accrued paid sick leave shall carry over to the following year of employment and may be capped at 48 hours or 6 days. “Use it or lose it” paid sick leave will no longer be legal.
• Employees may begin using accrued paid sick days no later than the 90th day of employment.
• Paid sick leave may be used by an employee for the diagnosis, care or treatment of the employee’s or his or her family member’s existing health condition or preventive care, or in relation to domestic violence, sexual assault, or stalking.
• Employers may limit the use of paid sick leave to 24 hours in each year of employment. Employees must use a minimum of 2 hours of sick leave each time sick leave is used.
• Accrued but unused paid sick time need not be paid to employees upon separation of employment (this is continued from the prior law). However, if employees are rehired within one year, previously unused paid sick time must be reinstated.
• Employees must be provided with a written notice that sets forth the amount of paid sick leave available on either itemized wage statements, or in a separate writing provided on payday. The Employer shall maintain at least three years of records documenting the hours worked and paid sick days accrued and used by employees.
–Adam K. Treiger
JULY 1, 2014
Today, July 1, 2014, is the day that the minimum wage goes up in California from $8 per hour to $9 per hour. The minimum wage will stay at $9 per hour until January 1, 2016, when it will again rise to $10 per hour. One aspect of this wage hike that is not immediately apparent is that the minimum monthly salary required to classify an employee as exempt is also going up, as it is pegged to the minimum wage. That is, in order to be exempt, an employee must be paid at least twice the minimum wage, on a monthly salary basis (careful, there are other necessary elements as well, not just the salary test). Thus today, the minimum salary for an exempt employee goes up from $2,773.34 per month (equating to $33,280 per year) to $3,120 per month (equating to $37,440 per year). On January 1, 2016, the minimum salary for an exempt employee will go up again to $3,466.67 per month (equating to $41,600 per year). –Adam K. Treiger
On January 1, 2014, California Labor Code section 432.7 was amended to make it illegal to ask about or use information regarding an employee’s or potential employee’s former criminal convictions when those convictions have been judicially dismissed or ordered sealed pursuant to law. Before this amendment, it was illegal to use arrest or prosecution records that did not result in a conviction. But, once there was a conviction, such records were fair game to use in employment decisions (so long as the use was reasonable from a business point of view and not discriminatory based on membership in a protected class). Convictions included plea bargains and no contest pleas. This is still true, but, if the conviction is ordered by a court to be sealed, expunged or otherwise judicially dismissed, for example, after the serving of a term of probation, it is as if the conviction did not happen (from a legal point of view) and therefore information about that former conviction cannot be used in employment decisions. There are exceptions to this new law, however, for jobs that require persons to carry or use firearms, for jobs that cannot be filled by formerly convicted individuals, and for various governmental jobs and interests. – Adam K. Treiger
JANUARY 18, 2013
Private schools utilize volunteers in a number of roles from classroom assistants to driving groups of students to extracurricular activities. What steps does a school need to undertake when utilizing volunteers for on campus school activities and off campus school sponsored activities? A checklist of some of the items to be reviewed:
(1) Volunteer Application: A signed application providing relevant history with standard questions as an employee application regarding prior criminal acts or drug or alcohol arrests.
(2) Background Check: Schools should conduct background checks as standard protocol for all volunteers. If a volunteer is to have any unsupervised contact with minor students, then the background checks should include fingerprinting with a background check.
(3) Volunteer Agreement: A signed agreement with the school whereby the volunteer accepts the terms of volunteer work such as adherence to school policies and procedures, conduct standards and a release of liability.
(4) Complaint and Investigation Procedure: A written procedure where students or parents can express any concerns relating to activities or conduct by a volunteer. Any complaints or concerns must be immediately and fully investigated by the school.
(5) Monitoring Program. A school designated employee who has responsibility for monitoring volunteers and compliance with the schools volunteer procedures and policies.
Summary: More courts are looking at volunteers the same as an employee of the school because volunteers are assuming functions that employees would also typically fulfill. Because the school is in loco parentis (in place of the parent) while under the school’s supervision, there is a heightened duty of care to protect the student from harm caused by an employee or a person placed in authority over a student as a volunteer. As such, schools need to exercise vigilance and insure that a system is in place, and followed, for selection and oversight of volunteers. – David T. Stowel
The “blogosphere” has further complicated the lives of school administrators. More schools are seeing instances of “negative blogs” concerning school administrative decisions, the hiring and firing of personnel and student participatory events such as school sports teams. When confronted with a negative blog, how should a school respond? Some steps to consider are:
(1) Contact the Blog Hosting Company. Most negative blogs are posted by individuals who do so anonymously. If information is deemed harmful or dangerous, or involves an impersonation of a private person, contact the blog hosting company immediately as many will remove harmful or dangerous content, or content that involves impersonation of a private person. However, most blog hosting companies take the position that absent these specific circumstances, they only provide “content creation tools” and do not monitor or mediate content regardless of how unappealing or distasteful or how unpopular the comments.
(2) Provide a Comment to the Negative Blog. If the blog hosting company does not remove the negative blog, consider preparing a response setting the record straight. Care must be exercised in such circumstances and should be properly vetted to insure legal compliance and adherence to school public relations procedures and school policies.
(3) Ignore the Negative Blog. Most negative blogs die out quickly and usually have low traffic anyway. Many times, the best strategy is to ignore the negative blog and use the school’s normal communication methods to explain any facts if the issue has created broad concern among the school community.
–David T. Stowell