California bill would codify Dynamex decision

A bill in the California legislature intended to codify the state Supreme Court’s Dynamex decision passed the California State Assembly on May 29.

AB5, which was introduced by Assemblywoman Lorena Gonzalez, D-San Diego, would “provide that the factors of the ABC test be applied in order to determine the status of a worker as an employee or independent contractor for all provisions of the Labor Code and the Unemployment Code, unless another definition or specification of ‘employee’ is provided.”

The bill passed the assembly by a vote of 55-11. In order to become law, the legislation still needs to pass the Senate and then be signed by the governor.

In 2018, the California Supreme Court’s Dynamex decision established the ABC test, which considers all workers to be employees unless the hiring business demonstrates that all of the factors are established:

A. That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact.

B. That the worker performs work that is outside the usual course of the hiring entity’s business.

C. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

Trucking, as well as companies such as Uber and Lyft, would be greatly affected by the changes.

“Big businesses shouldn’t be able to pass their costs onto taxpayers while depriving workers of the labor law protections they are rightfully entitled to,” Gonzalez said in a news release. “This legislation is an important work-in-progress to provide certainty to California’s businesses, provide protections for California’s workers and guard the taxpayers from subsidizing unscrupulous corporations.”

The Dynamex decision sparked controversy in the trucking industry as soon as the ruling was announced.

The Western States Trucking Association, as well as the California Trucking Association, quickly filed lawsuits. The trucking groups argue that part B makes it impossible for a trucking company to hire an independent contractor to haul a load.

“Basically, if a trucking company contracts with an owner-operator in any way, you cannot pass the B part of the test,” Western States wrote on its website. “Should an owner-operator you contracted with decide to sue you, and the case were class certified, the financial liability is massive.”

In March, however, Judge Morrison C. England Jr. for the U.S. District Court of the Eastern District of California ruled that the Dynamex decision does not create an excessive burden to interstate commerce.

Western States responded by filing a challenge with the U.S. Court of Appeals for the Ninth Circuit in April. The trucking group said it is willing to take the case all the way to the U.S. Supreme Court, if necessary.