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CA Bill Aims to Better Classify Workers

Thursday, April 4, 2019

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An assembly member in California is sponsoring a bill that would codify a way to better define whether a worker is an independent contractor or an employee.

AB 5, which would add a section to the state’s Labor Code, would pull from a 2018 decision in the Superior Court of Los Angeles, which relied on a test commonly known as the “ABC test” to establish whether or not a worker is an independent contractor.

What’s Happening

While the bill was introduced last December, it was amended in assembly on March 26, just a few weeks after a report was released from the University of California Berkeley Labor Center, which found that construction workers were one of three occupations—along with truck drivers and janitorial workers—in the state routinely misclassified as independent contractors.

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Assemblywoman Lorena Gonzalez, D-San Diego, is sponsoring a bill that would codify a way to better define whether a worker is an independent contractor or an employee.

“While there are legitimate circumstances where classifying workers as independent contractors is appropriate, it is clear that some employers misclassify workers as a way to reduce their labor costs by avoiding payroll taxes and payments for unemployment insurance and workers compensation,” the report states.

“Misclassification also allows employers to transfer some of their operating costs and legal risks to workers, which may result in lower earnings overall for misclassified workers. Misclassification is a significant drain on government resources, with the state losing an estimated $3,000 in annual tax revenues for every worker that is misclassified.”

Berkeley used a 2000 study by the U.S. Department of Labor and a 2011 report by the Economic Roundtable. According to those studies, the construction industry has the highest rate of misclassification nationally and that misclassification most commonly occurs in the “specialty trades and hands-on construction occupations, especially among workers whose occupation is carpet installer, laborer, painter, or construction helper.”

The legislation pulls from the Dynamex Operations West Inc. v. Superior Court of Los Angeles case, which implemented the ABC test, which says that someone is an employee if a company controls what they do, if their work is linked to a company’s primary business and if they do not have an independent business performing that work.

Assemblywoman Lorena Gonzalez, D-San Diego, is sponsoring the bill, which would codify that test.


Tagged categories: Good Technical Practice; Government; Labor; Laws and litigation; NA; North America

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