The Senate Appropriations Committee passed Assembly Bill 5 Friday with a 5-2 vote, meaning a bill that could drastically affect both local businesses and workers will soon head to the Senate floor for consideration by state legislators.
AB 5 was authored by Assemblywoman Lorena Gonzalez, D-San Diego, in an attempt to codify the 2018 Dynamex decision, which was a lawsuit brought to the Superior Court of Los Angeles by delivery drivers at Dynamex that changed the way businesses classify workers as independent contractors.
Businesses would now have to use a three-part formula, commonly known as the ABC test, to determine if workers are independent contractors or employees.
“The Dynamex decision that reclassified independent contractors as employees really complicates how a company manages its workforce,” said Holly Schroeder, president and CEO of the SCV Economic Development Corp. “There are times when additional work comes in so companies need to staff up by tapping into the willing and readily available independent contractor pool. But now if these people are classified as employees, it makes it a much more difficult proposition.”
Brian Koegle, employment and labor law attorney at Poole & Shaffery, discussed the bill at an employment-law seminar given earlier this year.
“From an employer’s standpoint, Dynamex is a difficult standard for most employers to comply with,” Koegle said in April. “This is now a step back, a pullback on what Dynamex did. This is a good sign that legislation is applying common sense to what’s happening on the mainstream that affects small and mid-size businesses.”
The Santa Clarita Valley Chamber of Commerce announced in March that it was joining the “I’m Independent” coalition to advocate for independent contractors because the Dynamex decision is putting the way of life of Californians at risk.
When the bill passed the state Assembly in May, Assemblywoman Christy Smith, D-Santa Clarita, voted aye, while Assemblyman Tom Lackey, R-Palmdale, voted nay.
Lackey could not be reached for comment Friday, but Smith said she is carefully watching the final version of the bill, “which will have serious consequences for employers and employees.”
