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AB5 Bears Its Teeth

July 27,
2020

Furious advocacy from both supporters and opponents of AB5 throughout its legislative pendency underscored the significant stakes of the legislation. However, it is important to remember that the bill codified a new legal test. It did not define specific results. Those classified as independent contractors did not receive an embossed state certificate entitling them to the rights and benefits of employees. Instead, they received the intangible legal right to hold their employers to the “ABC test” and the considerably more challenging standard it prescribes.[1]

 

To that end, AB5 was also endowed with an expanded scope of agencies authorized to enforce its provisions, vesting the Attorney General and city attorneys statewide with the authority to bring actions for injunctive relief to correct alleged misclassification. The California Labor Commissioner (authorized to enforce all provisions of the Labor Code) and workers themselves (those claiming harm by alleged misclassification) also remain entitled to bring actions of their own.

 

Seven months following AB5’s implementation, its expanded enforcement mechanism is already apparent.   On May 5, Attorney General Becerra (joined by the city attorneys of Los Angeles, San Francisco and San Diego) filed a complaint seeking injunctive relief, damages and penalties for misclassification against Lyft and Uber.[2] On July 16, San Francisco District Attorney Boudin filed a complaint on the same basis against DoorDash.[3] Most recently, the California Labor Commissioner targeted “Mobile Wash Inc.,” a gig-based car washing company, with a complaint for allegedly making a “business decision” to misclassify car washers as independent contractors.[4]

 

Another indicator of the priority being given to enforcement of AB5 is the 2020-21 State budget. Despite being created subject to unprecedented fiscal challenges resultant from the COVID-19 pandemic, over 20 million dollars is allocated specifically for the enforcement of AB5 by the Department of Justice and State agencies. [5] California voters will also play a pivotal role. The consortium of Uber, Lyft, DoorDash, Instacart and Postmates (recently acquired by Uber) raised the requisite signatures for the “Protect App-Based Drivers and Services Act” to appear on the November 2020 ballot as “Proposition 22,” a measure would exempt ride-share and delivery companies from AB5 entirely.[6]

 

Overall, the takeaway from this surge in prosecution is that various state agencies are watching.  Whether there will be enough results from the initially sacrificed lambs to prevent slaughter of the entire herd is yet to be seen. Business operators and owners who could be deemed “employers” should carefully review their procedures and consult with appropriate employment counsel as to proper classification. If those workers are deemed employees, they are eligible for workers’ compensation benefits as well.  Coverage is required in the state of California for workers’ compensation for any business with even just a single employee. Failure to appropriately misclassify an entire rank of workers could lead to significant exposure for an otherwise uninsured employer.

 

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[1] To satisfy the ABC test, a hiring entity must demonstrate that: (1) 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; and (2) the worker performs work that is outside the usual course of the hiring entity’s business; and (3) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

[2] https://oag.ca.gov/system/files/attachments/press-docs/2020-05-05%20-%20Filed%20Complaint.pdf

[3] https://sfdistrictattorney.org/sites/default/files/Document/DoorDash%20complaint.pdf

[4] https://www.dir.ca.gov/DIRNews/2020/2020-61.html

[5] http://www.ebudget.ca.gov/budget/2020-21EN/#/BudgetSummary

[6] https://www.sos.ca.gov/elections/ballot-measures/qualified-ballot-measures/

 

For questions, contact:

 

Curtis Wheaton

Associate Attorney, Oakland Office
cwheaton@hannabrophy.com

 

Have a referral? Contact us at: referrals@hannabrophy.com

 

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