> Congress uses its power to create groups A and B who are taxed different (or whatever).

The difficulty I have is that, as far as I can see, this step didn't happen. The groups were always defined by the states, and then Congress decided that they should be taxed differently.

I don't have a good grasp of which actual bodies hold which actual powers, so I'm going to continue talking as if this were a conflict between the formal legislature of California and the hypothetical CWCA.

There is a body of statutory law that defines the statuses of "employee" and "independent contractor". This body of law was amended by AB5. The two statuses have a variety of effects, such as tax withholding/prepayment requirements. I think this must be established by the legislature using its general legislative powers.

The CWCA has plenary power to create an arbitrary system of worker's compensation. It can do that however it likes, and it has chosen to do it -- in part -- by making reference to the statutory definitions of "employee" and "independent contractor".

As I read the (actual) ruling, the (hypothetical) CWCA's discretionary choice to make reference to the statute defining the status of "independent contractor" has now prohibited the legislature from amending that statute, despite the fact that writing the statute was within the legislature's power.

In particular, we don't see this:

> It's not infrequent to see definitions that change depending on agency context and use and power because of this happening.

> For example, defining "spouse" for the purposes of federal railroad benefits vs "spouse" for the purposes of "family medical leave" vs "spouse" for the purposes of immigration law vs ....

The CWCA could write a regulation that said "for all purposes relating to worker's compensation, an 'independent contractor' is defined as follows...", but they didn't. Instead, they have one that says "our regulations use the term 'independent contractor' as defined in §2750 of the Labor Code".

Given that body of CWCA law, I don't see how the legislature can be prohibited from amending §2750. Doing so will change the effect of the CWCA's regulations as presently codified. But that's just what happens when you make reference to an external standard. Even if you have absolute power over worker's compensation, once you use that power to delegate a definition to some other body, your absolute power cannot prevent that body from changing their definition. You won't have truly absolute power until you rescind the delegation of authority.

Going back to your example:

> Congress uses its power to create groups A and B who are taxed different (or whatever).

> The groups are never perfectly well drawn.

> A state comes along, and takes some folks in the "grey area", and says "yeah we're just gonna say that these folks are in group B"

The situation we have here seems to correspond to this:

1. Congress intends to use its power to tax lawyers differently. Perceiving a crippling lawyer shortage, they issue a law providing for a refundable tax credit of $1000 to "anyone licensed to practice law", which is a decision made at the state level.

2. Wyoming, also perceiving a crippling lawyer shortage, responds by amending their license requirements to require nothing more than an $800 one-time fee. Pay $800, and you're licensed to practice law in Wyoming.

3. Wyoming's amendment to its own licensure regime is legally blocked due to the conflict with Congress's taxing power.

What am I missing? I don't think step 3 could really happen, but I don't see the difference.