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SB-238 Worker status: factors for determination of employee status.(2019-2020)

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Date Published: 03/28/2019 09:00 PM
SB238:v98#DOCUMENT

Amended  IN  Senate  March 28, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 238

Introduced by Senator Grove
(Coauthors: Senators Bates, Borgeas, Chang, Jones, Moorlach, Morrell, Nielsen, Stone, and Wilk)

February 11, 2019

An act to amend Section 2750.5 of add Section 2750.2 to the Labor Code, relating to employment.


LEGISLATIVE COUNSEL'S DIGEST


SB 238, as amended, Grove. Employment relations. Worker status: factors for determination of employee status.
Existing law, as established in the case of Dynamex Operations W. v. Superior Court (2018) 4 Cal.5th 903 (Dynamex), creates a presumption that a worker who performs services for a hirer is an employee. Existing law requires a 3-part test, commonly known as the “ABC” test, to establish that a worker is an independent contractor for purposes of claims for wages and benefits arising under wage orders issued by the Industrial Welfare Commission.
This bill would instead, for purposes of claims for wages and benefits arising under wage orders, analyze whether the worker is economically dependent upon the hiring entity to determine whether that worker is an employee based upon the economic reality of the relationship with the hiring entity. The bill would require this analysis to be based solely upon enumerated factors that are similar to those used as a part of the Economic Realities Test in the federal Fair Labor Standards Act of 1938. This bill would provide legislative findings and declarations in support of these provisions, and would state in the findings and declarations that it is the intent of the Legislature that the test under these provisions be applied retroactively to claims filed on and after April 30, 2018.

Existing law provides a rebuttable presumption affecting the burden of proof that a worker performing services for which a license is required under the Contractors’ State License Law, or performing services for a person who is required to obtain that license, is an employee, rather than an independent contractor, and specifies factors to establish proof of independent contractor status.

This bill would make nonsubstantive changes to these provisions.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) On April 30, 2018, the California Supreme Court issued a landmark decision in Dynamex Operations W. v. Superior Court, (2018) 4 Cal.5th 903 by overturning 29 years of precedence established in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.
(b) The decision replaces the multifactor test for determining employment status from the Borello case with the ABC test, a one-size-fits-all and far more restrictive test consisting of just three factors, of which all must be met in order for an individual to be classified as an independent contractor.
(c) The decision puts the livelihood of nearly 2,000,000 Californians who choose to work as independent contractors at risk.
(d) The decision eliminates the choice that more and more Californians are making for their work and quality of life.
(e) The decision moves the state backwards and does not accurately reflect today’s realities, including the changing demands of the modern workplace.
(f) Prior to this decision, the ABC test never existed in California law or regulation.
(g) Such a momentous policy change should not be made by judicial fiat; instead, it should be made by the Legislature.
(h) The federal Fair Labor Standards Act 1938 (FLSA) provides a good model for determining employment status, as it is flexible enough to reflect today’s realities and modern workplace demands while also protecting the rights of workers.
(i) Conforming California’s law for determining employment status to the FLSA will also simplify compliance for employers and workers who will no longer have to navigate two different sets of rules.
(j) It is the intent of the Legislature to conform California’s test for determining employment status for purposes of wage orders to the test established by the federal Fair Labor Standards Act.
(k) It is the intent of the Legislature that this test for determining employment status for purposes of wage orders shall be interpreted to apply in California as it is applied under the federal Fair Labor Standards Act, including an emphasis on the degree of control and the specification that no one factor controls, but rather the totality of the circumstances.
(l) It is also the intent of the Legislature that this test will be effective for all claims filed on and after April 30, 2018.

SEC. 2.

 Section 2750.2 is added to the Labor Code, to read:

2750.2.
 For purposes of the wage orders under the provisions of this code and the wage orders of the Industrial Welfare Commission, the determination of whether a person providing labor or services for remuneration is considered an employee shall be based upon an analysis of whether that person is economically dependent upon the hiring entity. This analysis shall be based upon the economic reality of the worker’s relationship with the hiring entity by considering only the following six factors:
(a) The nature and degree of control by the principal.
(b) The worker’s opportunities for profit and loss.
(c) The amount of the worker’s investment in facilities and equipment.
(d) The permanency of the relationship.
(e) The required skill necessary for success.
(f) The extent to which the services rendered are an integral part of the principal’s business.

SECTION 1.Section 2750.5 of the Labor Code is amended to read:
2750.5.

(a)There is a rebuttable presumption affecting the burden of proof that an individual performing services for which a license is required pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, or who is performing such services for a person who is required to obtain such a license is an employee rather than an independent contractor. Proof of independent contractor status includes satisfactory proof of these factors:

(1)That the individual has the right to control, and discretion as to the manner of, performance of the contract for services in that the result of the work and not the means by which it is accomplished is the primary factor bargained for.

(2)That the individual is customarily engaged in an independently established business.

(3)That the individual’s independent contractor status is bona fide and not a subterfuge to avoid employee status. A bona fide independent contractor status is further evidenced by the presence of cumulative factors such as substantial investment other than personal services in the business, holding out to be in business for oneself, bargaining for a contract to complete a specific project for compensation by project rather than by time, control over the time and place the work is performed, supplying the tools or instrumentalities used in the work other than tools and instrumentalities normally and customarily provided by employees, hiring employees, performing work that is not ordinarily in the course of the principal’s work, performing work that requires a particular skill, holding a license pursuant to the Business and Professions Code, the intent by the parties that the work relationship is of an independent contractor status, or that the relationship is not severable or terminable at will by the principal but gives rise to an action for breach of contract.

(b)In addition to the factors contained in paragraphs (1), (2), and (3) of subdivision (a), a person performing any function or activity for which a license is required pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code shall hold a valid contractors’ license as a condition of having independent contractor status.

(c)For purposes of workers’ compensation law, this presumption is a supplement to the existing statutory definitions of employee and independent contractor, and is not intended to lessen the coverage of employees under Division 4 and Division 5.