Explore the implications of AB5 and Prop 22 on workers' compensation, including the shift from the Borello Test to the ABC Test for determining employee status in California. Learn how these legislations have influenced employment relationships and the gig economy.
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AB5 & PROP 22: HOW DID WE GET HERE? AB5 is a bill Governor Newsom signed into law in September 2019 addressing employment status when a hiring entity claims that the person it hired is an independent contractor. The bill codified the California Supreme Court s application of the ABC Test in Dynamex Operations West, Inc. v. Superior Court (2018) 4 Cal.5th 903. AB 5 requires the application of the ABC test to determine if a worker is an employee or an independent contractor for purposes of the Labor Code, the Unemployment Insurance Code, and the Industrial Welfare Commission (IWC) wage orders. Prior to AB5, employment status was determined by the Borello Test
ABC Test v. BORELLO ABC TEST A worker is considered an employee and not an independent contractor, unless the hiring entity meets all three conditions of the ABC test: 1. The person is independent of the hiring organization in connection with the performance of the work, both under the contract for the performance of the work and in fact. 2. The person performs work that is outside the hiring entity s business. 3. The person is routinely doing work in an independently established trade, occupation, or business that is the same as the work being requested and performed.
ABC TEST v. BORELLO BORELLO TEST The test relies upon several factors to determine whether a worker is an independent contractor or employee. Factors include: 1. Whether the potential employer has all necessary control over the manner and means of accomplishing the result desired. 2. Whether the worker performing services holds themselves out as being engaged in an occupation or business distinct from that of the employer; 3. Whether the work is a regular or integral part of the employer s business;
BORELLO continued 4. by their task; Whether the worker has invested in the business, such as in the equipment or materials required 5. Whether the service provided requires a special skill; 6. or by a specialist without supervision; The kind of occupation, and whether the work is usually done under the direction of the employer 7. The worker s opportunity for profit or loss depending on their managerial skill; 8. The length of time for which the services are to be performed; 9. The degree of permanence of the working relationship;
ABC Test v. BORELLO BORELLO continued 10. The method of payment, whether by time or by the job; 11. Whether the worker hires their own employees; 12. Whether the employer has a right to fire at will or whether a termination gives rise to an action for breach of contract; and 13. Whether or not the worker and the potential employer believe they are creating an employer- employee relationship (this may be relevant, but the legal determination of employment status is not based on whether the parties believe they have an employer-employee relationship).
PROP 22 Prop 22, created another exception to AB5 for gig (app-based) workers. It classified gig workers as independent contractors, but providing the following benefits: 1. 120% of the local minimum wage for each hour a driver spends driving (with passenger or en route), but not time spent waiting; 2. $0.30/mile for expenses for each mile driven with passenger or en route 3. Health insurance stipend for drivers who average more than 15 hours per week driving; 4. Requires the companies to provide occupational accident insurance for on-the job injuries; 5. Prohibits workplace discrimination and requires that companies: develop sexual harassment policies, conduct criminal background checks, and mandate safety training for driver
EMPLOYEE v. INDEPENDENT CONTRACTOR Why is the classification of a worker important? An employee is subject to various protections and benefits such: 1. Wage and hour laws 2. Workplace safety laws 3. Workers compensation laws and benefits (Labor Code Section 3700) 4. Employment discrimination laws An Independent Contractor must resolve their disputes or enforce their rights under their contracts through other means.
WORKERS COMPENSATION LABOR CODE SECTION 3700 requires all employers (except the state) to have workers compensation insurance. Employers may be permissibly self-insured.
WORKERS COMPENSATION NO INSURANCE?? CA Labor Code 3700.5 (2017) (a) The failure to secure the payment of compensation as required by this article by one who knew, or because of his or her knowledge or experience should be reasonably expected to have known, of the obligation to secure the payment of compensation, is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of up to double the amount of premium, as determined by the court, that would otherwise have been due to secure the payment of compensation during the time compensation was not secured, but not less than ten thousand dollars ($10,000), or by both that imprisonment and fine. (b) A second or subsequent conviction shall be punished by imprisonment in the county jail for a period not to exceed one year, by a fine of triple the amount of premium, or by both that imprisonment and fine, as determined by the court, that would otherwise have been due to secure the payment of compensation during the time payment was not secured, but not less than fifty thousand dollars ($50,000). (c) Upon a first conviction of a person under this section, the person may be charged the costs of investigation at the discretion of the court. Upon a subsequent conviction, the person shall be charged the costs of investigation in addition to any other penalties pursuant to subdivision (b). The costs of investigation shall be paid only after the payment of any benefits that may be owed to injured workers, any reimbursement that may be owed to the director for benefits provided to the injured worker pursuant to Section 3717, and any other penalty assessments that may be owed.
WORKERS COMPENSATION BENEFITS Under Worker Compensation Laws, employees are entitled to many benefits including: 1. Medical Treatment: 2. Temporary Disability Benefits 3. Permanent Disability Benefits 4. Job Displacement Benefit Voucher Injured employees may seek relief from the Workers Compensation Appeals Board (WCAB) if their employer fails to provide workers compensation benefits.
WORKERS COMPENSATION MEDICAL TREATMENT An injured employee has the right to medical treatment reasonably necessary to cure or relieve the employee from the effects of the injury. This include: 1. Doctor visits and other treatment services (chiropractic, physical therapy, etc.); 2. Tests 3. Medicines; 4. Medical equipment; 5. Travel costs reasonably necessary to treat your injury
WORKERS COMPENSATION TEMPORARY DISABILITY Temporary Disability benefits provide payments to an injured employee for lost wages because the injury prevents then from doing their usual job due to the injury. 1. Tax-free 2. Paid at 2/3 of average weekly wage, for up to 104 weeks. 3. Statutory minimum and maximum limits on temporary disability benefits.
WORKERS COMPENSATION PERMANENT DISABILITY Permanent disability benefits are designed to compensate an injured employee from physical loss and reduction in earning capacity. It is also tax free. Permanent disability is assessed once an injured employee s condition becomes permanent and stationary (not likely to have significant improvement)
WORKERS COMPENSATION - SUPPLEMENTAL JOB DISPLACEMENT BENEFITS Supplemental job displacement benefit is for the injured employee who cannot return to his/her usual job and the employer does not offer an alternative job. The employer is then entitled to a Supplement Job Displacement Voucher. The voucher can be used or training for a new job or skill. The voucher also allows the injured employee for an additional $5000 benefit from the State of California
PROP 22 LITIGATION ITS NOT OVER YET There continues to be litigation surrounding Prop 22. SEIU filed lawsuits regarding Prop 22. On August 20, 2021, a state court judge ruled that Prop 22 was unconstitutional stating that it limited the power of a future legislature to define employment status of gig workers. It s very likely that this case will reach the California Supreme Court.
