California Delivers Another Blow to Business Owners… Virtually Eliminates Independent Contractors

California Delivers Another Blow to Business Owners... Virtually Eliminates Independent Contractors

California lawmakers are at it again.

On September 19, 2019, the Governor of California signed AB 5 into law. AB 5, essentially, creates a presumption that previously-believed independent contractors are now employees.

The law adopts the “ABC” test. For someone to be an independent contractor, all of the following must be satisfied:

A – The person 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;

B – The person performs work that is outside the usual course of the hiring entity’s business; and

C – The person is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.

Generally, the “B” will be the problem for the business to satisfy.

In California, if the worker is deemed to be an employee, the business will have to, at a minimum, do the following:

• Pay the employee at least minimum wage;

• Pay the employee overtime, if not exempt, including daily overtime;

• Provide the employee meal and rest breaks;

• Reimburse the employee for expense;

• Provide the employee with paid sick leave;

• Provide the employee with paid family leave;

• Satisfy various notice, poster and wage statement requirements;

• Satisfy timekeeping record requirements;

• Maintain unemployment coverage;

• Maintain Workers’ compensation coverage;

• Satisfy paycheck timing requirements;

• Satisfy on-call, call-back and standby pay requirements;

• Satisfy travel time payment requirements;

• Satisfy final paycheck requirements;

• Follow commission payment rules.

Failure to follow California law in this regard will subject the business not only to penalties from the State of California, but leave the business vulnerable to lawsuits from workers (including class action lawsuits).

Tell me again, why do businesses stay in California?

The discussions concerning fees can be uncomfortable.  However, recall that your lawyer should work for you. As such, you should ask questions about how you are being billed and make sure that you fully understand the billing policies of your lawyer.

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