AB5 created a three-part test business must generally pass in order for it to classify a worker as an independent contractor under California Law. Part B of the Dynamex or ABC test is whether the worker “performs work that is outside the usual course of the hiring entity’s business.” Part B of the test is a major obstacle for many businesses.
In order to pass this test and be considered an independent contractor, a worker must perform work that is not part of the hiring entity’s usual course of business. For example, a chef hired by a restaurant will not pass this test because the chef’s work (preparing food) is within the usual course of business for a restaurant. A plumber hired by the restaurant will pass this test because the plumber’s work (fixing pipes) is outside the usual course of business for a restaurant.
Part B of the Dynamex test seems particularly troubling for long established independent contractor relationships that exist in industries like construction. However, AB5 creates special rules for the treatment of subcontractors on construction sites. AB5 also creates exceptions for workers like doctors, attorneys, accountants, and other workers that have historically worked as independent contractors.
Gig economy websites like Uber and Lyft have argued that their workers pass part B of the test because they are in the business of providing a platform, and they are not in the business of providing whatever goods or services the workers provide through their platforms. To give an example, Tony West, the General Counsel of Uber, stated, “Driver’s work is outside the usual course of Uber’s business, which is serving as a technology platform.”
On the other hand, the legislative history of AB5 is critical of technology companies. One Senate report urges AB5 should have “technological neutrality” and that it should not matter whether a worker’s services are “contracted through the Yellow Pages or the internet.” The report argues the “State’s need to protect workers” should not be undermined by a “killer application” or “clever branding.”
It remains to be seen whether the California courts will side with the platform argument that companies like Uber and Lyft promulgate, or whether they will adopt the view of the legislative history. Doordash, Uber, and Lyft have also proposed a ballot measure that would exempt “app-based drivers” from being treated as employees.
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Published by Joe Cole