HR Policy Examines California’s New Law Imposing Strict Limitations on Independent Contractor Status

October 04, 2019

Pitney Bowes Executive Vice President and Chief Human Resources Officer Johnna Torsone kicked off an Association-wide call on California's attempts to clamp down on the use of independent contractors by stating, “This measure has implications for any company that uses independent contractors anywhere.”

“Even if you don’t have any independent contractors in California,” Torsone, who chairs our Employment Rights Committee, continued, “you need to pay attention because this is a public policy issue that is not going to go away, with some other states already adopting the ABC test.  In fact, there is legislation in Congress codifying the ABC test that could be made a priority by the next president, depending on the election.”

California’s AB 5 codifies a strict three-part "ABC" test for determining independent contractor status, which was established recently by the state Supreme Court’s Dynamex decision.

The call featured Michael Lotito, Co-chair of Littler’s Workplace Policy Institute, Roger King, Senior Labor and Employment Counsel for HR Policy, and Mark Wilson, Chief Economist and Vice President, Health and Employment Policy for HR Policy.

King noted that in the wake of the Dynamex decision, AB 5 “failed to provide any clarity or relief for employers” despite containing several exemptions from the ABC test, many of which “could be litigated on a ‘void for vagueness basis.’”

Lotito, who walked through the details of the new law, observed: “We are going to see a litigation explosion in January when the bill becomes law.  By adopting the ABC test, all of the unresolved issues with the test are now in the statute."

Wilson highlighted the uncertainty surrounding the issue in California, saying, “Among the many questions that remain to be answered is whether the DOL’s recent opinion letter, which states that workers who use a virtual marketplace to connect with consumers are independent contractors, will apply in California.”

Meanwhile, the House Subcommittee on Workforce Protections held a hearing on the misclassification of workers as independent employees and the Payroll Fraud Prevention Act of 2018, which would require employers to provide written notice to all workers regarding their status as either an employee or non-employee.  The measure is now part of the Pro Act (H.R. 2474).

Alexander J. Passantino, partner at Seyfarth Shaw, testified the result of such legislation “is bad for employees and employers alike; rather the focus should be on developing a legislative solution that protects innovation and flexibility while protecting those most in need of protection.”