AB 5 Was Repealed and the Legislature Didn’t Create the Problem

AB 5 Was Repealed and the Legislature Didn’t Create the Problem By Chris Micheli

            Did this 2-part headline get your attention? When did the Legislature repeal AB 5? And, how did the Legislature not create the problem? As a self-professed “legislative geek,” I wanted to set the record straight about AB 5 and worker classification in California.

First, here are the short answers to the two questions posed: AB 5 was repealed by AB 2257, that replicated AB 5’s language elsewhere in the Labor Code and added dozens more exemptions from the ABC Test. And, it was the California Supreme Court, rather than the Legislature, that caused the problem in the first place by issuing its Dynamex decision.

The issue of proper worker classification has been a problem for decades at both the federal and statute levels, with different guidance among numerous government agencies depending upon the reason for classification – tax or labor law compliance. California has not been any different. After decades of conflicting state agency guidance, the state’s high court issued its decision, followed by the legislative branch’s enactment of AB 5.

The “problem,” at least from the employer perspective, began when the California Supreme Court issued its 7-0 decision in Dynamex Operations West v. Superior Court. It is that high court decision that created the “ABC Test” in this state, which neither executive branch agencies nor the Legislature ever considered. In other words, even if AB 5 had never been enacted, the “law of the land” would still have been the ABC Test.

This is why I always clarify that the Legislature did not create this problem. The state’s highest court did when it issued its decision that adopted the nearly impossible to meet ABC Test to ensure a worker is properly classified as an independent contractor. Unfortunately, there has always been confusion about this because many claim that the Legislature created the ABC Test because they technically codified the ABC Test in statute.

Moreover, again speaking technically, AB 5 was repealed by a subsequent bill, AB 2257. So, while many employers and workers know AB 5, the statute it created no longer exists. In other words, many incorrectly claim AB 5 as the basis for the adverse impact on workers and businesses.

Again, however, AB 5 was repealed by the enactment of AB 2257. Many businesses and professions are thankful for the Legislature’s enactment of AB 5, and then of AB 2257. Why would that be? AB 5 originally created 57 statutory exemptions from the strict ABC Test, as the Legislature recognized that the ABC Test was too broad to be applicable across the board.

As a result, those occupations and professions who have an exemption continue to operate under pre-Dynamex law (i.e., the Borello case factors). Thereafter, when AB 2257 was enacted, that bill added 52 more exemptions in the Labor Code. Because of AB 2257, 109 exemptions from the ABC Test are now codified.

From my perspective, those critical of AB 5 fail to recognize that the ABC Test was in place before the enactment of AB 5 and the Dynamex decision would apply to everyone. Instead, in AB 5 and AB 2257, the Legislature thankfully exempted 109 businesses, professions, and occupations from the onerous ABC Test.

 

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