What employers should know about California's proposed worker classification bill

The California Legislature introduced AB 5 to codify the ABC test set forth in the Dynamex holding and proposes additional parameters to specify to whom and when the ABC test applies. (Photo: Shutterstock)

In May, the California State Assembly overwhelmingly passed a bill set to have a major impact on how companies classify their workers in the state. Assembly Bill 5 (AB 5) aims to codify the new standard expounded by Dynamex Operations West, Inc.  v. Superior Court of Los Angeles for determining whether workers regulated by the 17 Wage Orders in California are employees or independent contractors.

Proponents of AB 5 see it as a means to address inadequate workplace protections and loss of revenue due to underpaid payroll taxes, workers’ compensation premiums, state unemployment, and disability insurance. Critics, however, argue that the bill harms workers’ schedule flexibility and opportunities for supplemental income.