California Legislature Adopts Several New Employment Laws for 2020

Governor Gavin Newsom recently signed a number of bills that will affect California employers in 2020. Most significantly, the new laws codified the ABC test for independent contractors, clarified sexual harassment training requirements and deadlines for employers, and created stricter enforcement of employment arbitration agreements. Other significant laws include:

• Additional penalties for late or incorrect wages
• Expansion of leaves for organ donation and paid family leave
• Prohibition of hairstyle discrimination

Below are summaries of the key aspects of these new laws. All approved bills will become effective on January 1, 2020, unless otherwise noted.

With Assembly Bill (“AB”) 5, Governor Newsom codified the state’s legal test for determining whether a worker is properly classified as an independent contractor rather than an employee. The so-called ABC test will make it significantly more difficult for a worker to qualify as an independent contractor.
Under the test, a worker can only be classified as an independent contractor if:

(a) the worker is free from control and direction in the performance of services; and
(b) the worker is performing work outside the usual course of the business of the hiring company; and
(c) the worker is customarily engaged in an independently established trade, occupation, or business.

AB 5 exempts a long list of occupations and types of service providers from the ABC test (including doctors, lawyers, architects, engineers, insurance brokers, real estate agents, hair stylists and barbers, certain freelancers, etc.), and the old Borello test will continue to apply to these exempted workers. In addition, AB 5 exempts business-to-business contractors from the ABC Test as long as they meet a set of 12 criteria to demonstrate that the contractor operates as its own business entity.

Misclassified workers can use the ABC test to classify themselves as employees and make claims against employers, such as failure to provide accurate and complete wage statements, failure to pay unemployment insurance tax, failure to provide workers’ compensation insurance, and more. In addition, the California Attorney General and certain city attorneys will be empowered to pursue injunctions against businesses suspected of misclassifying workers.

The issue of whether AB 5 is retroactive is pending, and the Ninth Circuit Court of Appeals has sent the matter to the California Supreme Court for consideration in the case of Vasquez v. Jan-Pro Franchising Int’l, Inc.

Click here to read more of this article from the National Law Review.