Source: https://www.robertschriebman.net/Articles/ASK-THE-CALIFORNIA-EMPLOYMENT-TAX-AND-PAYROLL-TAX-ATTORNEY-AB-5-HAS-BEEN-SIGNED-INTO-LAW-HOW-WILL-THE-NEW-LAW-IMPACT-YOUR-BUSINESS-PART-1.shtml
Timestamp: 2019-11-12 18:48:41
Document Index: 461953280

Matched Legal Cases: ['ART 1', 'ART 1', '§ 2750', '§ 606', '§ 2750', '§ 606']

ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – AB 5 HAS BEEN SIGNED INTO LAW – HOW WILL THE NEW LAW IMPACT YOUR BUSINESS? – PART 1 | Robert S. Schriebman, A Professional Law Corporation | Los Angeles, California
ASK THE CALIFORNIA EMPLOYMENT TAX AND PAYROLL TAX ATTORNEY – AB 5 HAS BEEN SIGNED INTO LAW – HOW WILL THE NEW LAW IMPACT YOUR BUSINESS? – PART 1
There are several articles on this website that have discussed and set forth AB 5 as it was moving through the legislature in draft form. On September 18, 2019, AB 5 was finalized and signed into law by Governor Newsome. The new law is effective beginning January 1, 2020.
This series of articles will discuss all of the facets of the final version of AB 5. First let's review the historic background and then its legislative intent. Thereafter, I will set forth new Labor Code and CUIAB Code changes. Finally, I will discuss the many exceptions to new Labor Code § 2750.3 and amendments to CUIC §§ 606.5 and 621. Before doing so however, it is important that we take a brief historical overview of the Dynamex case that led to the enactment of AB 5. We must also be familiar with the 1989 California Supreme Court Borello decision. It is important for you to understand that any exemptions from the impact of AB 5 do not automatically mean that the exempt worker is a 'slam-dunk' independent contractor. His/Her status as an independent contractor will be governed by Borello.
After briefly discussing the Dynamex decision, the legislature stated that the current definition of "Employee" includes any individual who, under the usual common law rules governing the employer-employee relationship, has the status of an employee. Admittedly, it is never good practice to define a term such as employee by using the same word. Under Dynamex there will now be a very strong presumption that a worker is an employee unless and until the employer can convince a judge or the EDD that the worker is free from the control and direction of a hiring entity. Further, the employer must prove that the worker performs work that is outside the usual course of the hiring entity's business. Finally, the employer must also prove that the worker is customarily engaged in an independently established trade, occupation or a business. Any exception to this presumption will now have to undergo the Borello test. In other words, there are now at least four hoops the hiring entity must clear in order for the worker to be considered and independent contractor.
Section 1 of AB 5 goes on to state the legislative objectives in enacting AB 5. Here are the primary concerns:
1. Misclassified workers lose significant work place protections, such as unemployment benefits, and other traditional protections.
2. Misclassified workers have lost basic rights and protections including a minimum wage, workers compensation benefits, sick pay leave and paid family leave.
3. The misclassification of workers has been a significant factor in the erosion of the middle class and the rise in income in inequality.
4. Companies that misclassify workers for the purpose of increasing bottom line profits, do not compete fairly in the market place.
5. The State Treasury is losing big bucks in its failure to capture potential employment taxes.
New Labor Code Section and Revised CUIC Sections
AB 5 created new Labor Code § 2750.3. In a nutshell this new section codifies the ABC Standard set forth in Dynamex. The new law basically states that all workers, unless exempt, are going to be considered employees unless the hiring entity can prove the following:
C. The person is customarily engaged in an independently established trade, occupation, or business or the same nature as that involved in the work performed.
CUIC §§ 606.5 and 621 have been modified to eliminate the common law tests for establishing an employer-employee relationship.
The remaining provisions of AB 5 deal with the many exemptions under the ABC Standard and these exemptions will be discussed the following articles.
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