Almost two-thirds of contract workers to be reclassified as employees under new California law: report

Berkeley, CA — Nearly 2 out of 3 California workers whose primary job is as an independent contractor will have their employment status restored under state law A.B. 5, according to a data brief released Nov. 12 by the Center for Labor Research and Education at the University of California, Berkeley.

Signed Sept. 18 by Gov. Gavin Newsom (D) and slated to go into effect Jan. 1, A.B. 5 requires the state to use the three-step “ABC test” to determine whether a worker is an independent contractor. The test was first adopted by the California Supreme Court in April 2018, when it ruled unanimously in favor of drivers working for Dynamex Operations West, a package and document delivery company that had converted all of its drivers to independent contractor status.

In its decision, the court ruled that workers can be classified as independent contractors if:

1. They are “free from control and direction” of the employer as it relates to performance of the work.
2. Their work is performed “outside the usual course” of the hiring entity’s business.
3. They engage in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

To measure the level of the legislation’s applicability among independent contractors in the state, researchers from the center analyzed data from the American Community Survey, which included only data about respondents’ main job – excluding those whose work provides supplemental income.

According to the data brief, the test applies to 64% of this workforce, which includes child care workers; grounds maintenance workers; janitors, maids and other cleaners; retail workers; and truck and taxi drivers.

The test applies to an additional 27% of this workforce “except under certain strict and specific circumstances.” For example, the test is applicable to hairstylists and barbers except when they set their own rates, process their own payments, set their own hours, schedule their own clients and have their own business license. Other occupations that fall into this group include construction workers; designers and other artists; personal appearance workers; sales representatives; and writers, editors and photographers.

The test, and subsequently A.B. 5, does not apply to the remaining 9% of this workforce, which includes well-compensated professions such as accountants, dentists, doctors, lawyers and real estate agents.

The law isn’t without its challengers, however. On Oct. 29, an industry-backed effort led to the filing of a ballot measure intended to exempt app-based drivers from the legislation. The measure, called the Protect App-Based Drivers and Services Act, seeks an exemption for app-based drivers, food and grocery delivery drivers, etc., to be allowed to maintain their flexibility as independent contractors. Supporters of the measure – which, according to an Oct. 29 report in Bloomberg Law, has $90 million in backing from Uber, Lyft and DoorDash – are attempting to get it on the Nov. 3, 2020, ballot as an initiated state statute.