Navigating California employment law can be a daunting undertaking.  Governor Gavin Newsom recently signed a number of bills that will affect Californian companies this year. Most significantly, the new laws codify the ABC test for independent contractors and add penalties for late or incorrect wages.

Governor Newsom outlined the state’s legal test for determining whether a worker is an independent contractor or an employee with Assembly Bill 5 (AB5). It is often referred to as the ABC test and it makes it challenging for a worker to be paid as an independent contract. Under the new rules, a worker is classified as an independent contractor if:

  • The worker is able to control and direct the performance of their services;
  • The worker is engaging in work that is not the usual course of business of the company; and
  • The worker is typically engaged in an independent fashion in an established trade, business or occupation.

The bill can be used by workers that have been misclassified to test if they are actually employees and then, make claims against employers.  Claims can include failure to provide accurate and complete wage statements, failure to pay unemployment insurance tax, failure to provide workers’ compensation insurance, and more.

The final item to keep an eye on is if AB5 will be retroactive. This is pending at the California Supreme Court. Stay tuned for more information.