As we head into the fourth quarter of 2019, there are a couple of legal updates you should be aware of.
First, Governor Newsom has signed into law AB 5, which further clarifies the distinction between employees and independent contractors. The law goes into effect on January 1, 2020 and is expected to have a big impact on gig-economy companies like Lyft and Uber, as well as app-based services that depend on contractors such as food delivery and dog-walking services.
Second, the deadline for harassment prevention training (now required for all employees of companies with 5 or more employees including independent contractors) has been extended to January 1, 2021. This will allow more time for large employers who previously only trained supervisors to train their other employees and for smaller companies to train both supervisors and employees. As a reminder, training for supervisors must be at least two hours, and training for non-supervisors must be at least one hour. Training must be repeated at least every two years. Remember to keep records of training for both employees and supervisors.
AB 5 adopts the “ABC” test, which I wrote about earlier this year, to determine whether an individual is an employee or an independent contractor.
Under the ABC Test, in order to classify a worker as an independent contractor the hiring entity must establish that the worker meets EACH of the following three factors:
- The worker is free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact; AND
- The worker performs work that is outside the usual course of the hiring entity’s business; AND
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
One of the things I tell clients is that it’s essential to consider how you define your core business (2) and how does the worker assist you in that core business.
The new law allows for a few exceptions for positions that are subject to the 9-factor Borello test. Some examples of positions that fit into this category are: insurance brokers, physicians and surgeons, hairstylists, attorneys, and accountants.
Misclassification can be extremely costly for employers in legal fees, back wages and benefits, and penalties. Now is an ideal time to do an overall review of how you’ve classified your workers. Also, it’s important to consult with an employment attorney if you plan to audit your records and reclassify your contractors.
Please feel free to contact me at email@example.com if you need assistance.