Since 1989, California courts and regulators applied a set of rules called the Borello test for deciding whether a worker was an independent contractor. This approach weighed nine different factors to account for the variety of California industries and professions that would be regulated.

Despite this test being used for over three decades, the California Supreme Court made a surprising and unprecedented departure in April 2018 by replacing these nine factors with a one-size-fits-all approach consisting of just three factors which are also far more restrictive.

This new test, called “ABC,” has never existed in any form of California law, either in statute or by regulation. The ABC test is the first time in U.S. history that such a test has been imposed by a court, without legislative approval, with three independently dispositive factors.

A bill you have probably read about, AB 5 (Gonzalez; D-San Diego), seeks to codify the court decision in a manner that some industries think brings clarity and certainty to while others see it as a threat to how they do business.

Initially, AB 5 exempted doctors, insurance agents, and securities advisers from what would become the new standard. While we agreed that these professionals should be exempted from the application of Dynamex and AB 5, we fought hard to include commercial real estate brokers and real estate agents and were successful.  That exemption remains in the bill.

This is an odd and complicated bill, but we are hoping to be able to support AB 5 once it is in a shape to deal with the professional and licensed classifications in a way that maintains their true independence.

AB 5 will be voted on next week.

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