Independent contractors and AB 2257: different year, same story

Last year at this time, Californians were bracing for a dramatic change in the legal test used to determine whether a worker is an employee or an independent contractor: Assembly Bill 5. True, some 15 months earlier the California Supreme Court had unanimously abandoned its prior test (S.G. Borello & Sons, Inc. v. Department of Industrial Relations) and replaced it with the ABC test. But Dynamex Operations West v. Superior Court was limited to the California wage orders and almost immediately was subject to speculation about legislative "fixes" to the issues it created. Well, the fix came in the form of AB 5.

While the law takes approximately 130 words to outline the ABC test itself, it uses approximately 3,478 words to describe approximately 41 "exceptions" to the ABC test. If an occupation or a business qualifies for one of these exceptions, it gets to use the Borello test to determine status -- the very test that had been expressly discarded by the Supreme Court.

AB 5 went into effect on Jan. 1, 2020. Five days later, the first bill to amend the brand new law was introduced. At the zenith of the legislative session, 31 separate bills were under consideration to either amend or abandon AB 5. Eventually, there were two: AB 2257, and AB 323. Both were passed on the last day of the legislative session, and are making their way to the desk of Gov. Gavin Newsom.

If, as expected, the governor signs the bills, will the arc of California's independent contractor law be fundamentally altered? Will the bills change the basic framework of AB 5: The ABC test, and the numerous complicated "exceptions" to the test? The answer is a resounding no.

AB 2257 adds 21 new exceptions to the law, including, but not (even remotely close to) limited to: recording artists, songwriters, performance artists, licensed landscape architects, freelance translators, registered professional foresters, home inspectors, and feedback aggregators.

Californians are challenged to find the common thread among this diverse group of occupations, or better yet, to find a common thread between this group and the group of 41 exceptions in the original version of AB 5.

AB 2257 also makes substantial modifications in the existing exceptions for freelance journalists and freelance photographers, eliminating the "rule of 35" which was created by AB 5.

AB 2257 also modifies the "business-to-business" exception, and the "referral agency" exception to AB 5. These changes provide a bit more flexibility for businesses seeking to engage contractors to meet their missions and provide goods and services to customers.

For those workers who deliver printed newspapers, AB 323 provides another year of their exception to the ABC test. Absent a further legislative fix, newspaper delivery workers likely will need to be classified as employees as of Jan. 1, 2022.

Remember, just because a particular occupation qualifies for an exception -- this does not make the worker a contractor -- it just means that the Borello test is applied to determine status. In essence, the law creates a test to determine which test shall be applied.

AB 2257 also expands public enforcement of California's independent contractor laws, allowing any district in the state to bring an action alleging misclassification of workers within their jurisdiction.

For all it does, AB 2257 leaves unaddressed numerous important legal issues. For example, the bill does not address the question of retroactivity of the Dynamex decision -- a question subject to ongoing litigation and which has significant repercussions for businesses and workers in the state. The bill also does not address other important issues currently working their way through the courts: whether the ABC test applies, or does not apply, to the relationship between a franchisor and its franchisees; the status of independent owner-operator truckers; and the gig economy itself.

Proposition 22 may provide some answers, but that effort, if successful, will impact only transportation network companies and delivery network companies. The rest of the state will still be forced to grapple with numerous ongoing legal questions and battles left in the wake of AB 5.

Is there a better way forward? Over the 10-year period in which the gig economy was conceived, the California Legislature took very little action to grapple with the policy implications of this new way of work. The Legislature did not act until our Supreme Court did. But remember that Dynamex involved a single delivery driver, who drove for a total of 15 days, approximately 16 years ago. Developing policy for the fifth-largest economy in the world, based on this severely limited set of facts, seems a bit imprudent.

Unfortunately, it seems that 2020 will be another lost year for any such discussions. All that AB 2257 seems to provide is just another step down the road -- the road of AB 5, the ABC test, and the growing multitude of exceptions to that test. We shall see what 2021 brings, but it is not too bold to predict that -- with regard to our turbulent debates over independent contractor status -- next year will bring more of the same. 