California Senate codifies state court’s Dynamex decision

California Gov. Gavin Newsom signed into law a bill aimed at preventing businesses from misclassifying workers in the state.

The state senate on Sept. 11, approved Assembly Bill 5, which codifies the California Supreme Court’s decision in the controversial Dynamex case. Newsom signed the worker classification bill into law on Sept. 18.

“Assembly Bill 5 is landmark legislation for workers and our economy,” Newsom wrote. “It will help reduce worker misclassification – workers being wrongly classified as ‘independent contractors’ rather than employees, which erodes basic worker protections.”

The Dynamex decision in 2018 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.

What happens next?

The worker classification bill is not exclusive to the trucking industry, but the California Trucking Association and the Western States Trucking Association are among the groups that claim the B factor of the ABC test will mean the death of the owner-operator model in the state.

Such companies as Uber and Lyft also oppose the bill. The law goes into effect Jan. 1. Expect lawsuits in the near future.

OOIDA isn’t predicting a doomsday scenario but is watching the situation closely.

“In trucking, the concern is that it might be difficult for many owner-operators and motor carriers to comply with (the B factor) requirement,” OOIDA wrote in a letter to its California members. “At this time, we think that’s a premature assumption. However, should this new law negatively impact legitimate independent owner-operators, rest assured OOIDA will challenge it in every way possible.” LL