California Legislature Codifies Dynamex Decision

Date: October 02, 2019

The California legislature passed Assembly Bill 5, codifying an elaborate scheme used in determining which workers count as employees or contractors.

The California legislature codified the state’s Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, last month. The decision, which rejected the previously used test for determining whether workers should be classified as employees or contractors, created a standard in which workers are presumed to be employees rather than contractors.

In response, the California legislature passed Assembly Bill 5, which added the decision’s standard to the state’s regulatory code. However, rather than simply passing specific guidelines for the entire workforce, the legislature enacted numerous exceptions for various industries.

“I counted 37 occupations which received safe shelter from complying with the State Supreme Court’s so-called ABC test,” said NFIB’s California State Director John Kabateck. “This is a sad day for good governance.

“AB 5 will forever be a missed opportunity to ameliorate a bad court decision by establishing a uniform law for all to follow,” said Kabateck. “Prior to the court’s Dynamex decision, our state was served quite capably by the Borello decision for the past 30 years.”

One of the main issues with the Dynamex decision and resulting legislation is that the new test allows for zero flexibility for who qualifies as an independent contractor. This is a major problem for small businesses, particularly those just starting out, who want to hire workers that value a degree of independence.

“Industry-by-industry exemptions from Dynamex don’t work for small businesses,” said NFIB Policy Director Shawn Lewis. “Small businesses represent a vast diversity of industries, and the Legislature should not be in the business of picking winners and losers. The undeniable truth is the current status of the law is unworkable for far too many small businesses and entrepreneurs in a state as diverse as California.”

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