California Bill Would Codify ABC Test For Employee Status

Much to the consternation of employers, the California Supreme Court last year adopted a three-factor test, known as the "ABC" test, for determining when a worker is an employee.  Dynamex Operations West, Inc. v. Superior Court of Los Angeles, 4 Cal.5th 903(2018).   Under this test, workers are presumed to be employees for purposes of the California wage orders unless the hiring entity establishes each of the following:

(A) that the worker is free from the control and direction of the hiring entity 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; and 

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

Assemblymember Lorena Gonzalez would like to codify the Dynamex test and extend it to all provisions of the California Labor Code, unless another definition of "employee" is provided.  The bill, AB 5, would not apply Dynamex to certain categories of workers, such as licensed broker-dealers and investment advisers.  These workers would be subject to the test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v Department of Industrial Relations, 48 Cal.3d 341 (1989).

For more background on Dynamex, see California Supreme Court Appears to Buck Decades of Authority Regarding Independent Contractors.