Is the Gig up? Governor Newsom signs AB 5 in California
Last week, California Governor Gavin Newsom signed into law Assembly Bill 5, which clarifies how to determine whether workers are employees or independent contractors. State Assemblymember Lorena Gonzalez of San Diego authored AB5 to codify the unanimous 2018 California Supreme Court Dynamex decision by implementing the “ABC” test across the board in California. The Dynamex decision stated that in order for a worker to be considered a true independent contractor under the California wage orders, an employer must show:
(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. (See full decision here)
The introduction of this bill set off a frenzy by industry groups seeking an exemption to AB5 rules. Several groups were able to win carve-outs, such as doctors and hairdressers. Uber, Lyft, and the trucking industry were not successful in getting any exemptions and now face the full force of law.
Following the passage of AB5, several app-based companies such as Uber, Lyft, and Doordash each pledged $30 million to help fund a ballot initiative to overturn AB5. In a somewhat contradictory statement Uber’s Chief Legal Officer, Tony West, recently stated that AB5 doesn’t apply to Uber because drivers are not a core part of its business after arguing for months that AB5 would kill rideshare services and now pledging $30 million to overturn a law which they now say doesn’t apply to them.
These app-based companies appear to be taking a page from the port trucking industry’s playbook by trying to claim that laws just don’t apply to them. Yet despite numerous lawsuits and legal challenges filed by the trucking industry, the state and federal courts have repeatedly upheld that port trucking companies have to follow California’s wage and hour laws. Meanwhile, port drivers have overwhelmingly been found to be employees by courts and government agencies under yet more complex standards than the ABC test – including in over 448 decision issued by the Labor Commissioner alone. And however AB5 plays out, the law is clear – port truck drivers are already covered by California employment laws, and the Labor Commissioner has the clear authority to enforce them.