Last month California Governor Gavin Newsom signed Assembly Bill 5 into law. Beginning next year, the world of California employment will look completely different. Parts of the law apply retroactively, changing the landscape now as well. While the law targeted gig economy companies like Uber and Lyft, it will have a profound effect across most California businesses. So what does the new law actually say and how will it affect your business?
Prior to this new law, businesses and the government had a lot more leeway to argue whether someone was an employee or an independent contractor. There were a number of factors, and courts had some discretion in weighing them against each other. The new law is much more strict. For someone to be considered an independent contractor, they must meet three requirements. If any of the three don’t apply to a worker, then that worker is an employee. The three factors are:
A. The company does not control the time, method, or manner of the worker’s job performance.
B. The worker performs work that is not part of the company’s usual business.
C. The worker performs work in this field for other companies.
If the worker and business fail any of these three criteria, California will consider the worker an employee. This will throw many businesses into chaos. The film industry, game development, and music production will be affected by the new rules. This is something that companies must address as soon as possible. Companies should be developing procedures to ensure that workers are appropriately covered, that contractors have the proper paperwork to protect the company and the contractor, and to check which of the numerous exemptions may apply to them.
Contact The Law Firm of Dillon McCarthy for assistance in navigating this complex new aspect of your company or production.