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SB-806 Worker status: employees: independent contractors.(2019-2020)

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Date Published: 04/29/2020 09:00 PM
SB806:v97#DOCUMENT

Amended  IN  Senate  April 29, 2020
Amended  IN  Senate  February 26, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 806


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

January 09, 2020


An act to repeal and add Section 2750.3 of the Labor Code, relating to employment. employment, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


SB 806, as amended, Grove. Worker status: employees: independent contractors.
Existing law, as established in the case of Dynamex Operations W. Inc. v. Superior Court (2018) 4 Cal.5th 903 (Dynamex), creates a presumption that a worker who performs services for a hirer is an employee for purposes of claims for wages and benefits arising under wage orders issued by the Industrial Welfare Commission. Existing law requires a 3-part test, commonly known as the “ABC” test, to determine if workers are employees or independent contractors for purposes of specified wage orders.
Existing law establishes that, for purposes of the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration is considered an employee rather than an independent contractor unless the hiring entity demonstrates that the person is free from the control and direction of the hiring entity in connection with the performance of the work, the person performs work that is outside the usual course of the hiring entity’s business, and the person is customarily engaged in an independently established trade, occupation, or business. This test is commonly known as the “ABC” test. Existing law charges the Labor Commissioner with the enforcement of labor laws, including worker classification.
Existing law exempts specified occupations and business relationships from the application of Dynamex and these provisions. Existing law instead provides that these exempt relationships are governed by the test adopted in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.
This bill would repeal these statutory provisions. The bill would, instead, establish a new test that, for purposes of specific provisions of the Labor Code governing the relationship of employer and employees, a person providing labor or services for remuneration is considered an employee rather than an independent contractor, unless the hiring entity demonstrates that the person is (1) free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact, determined by a preponderance of factors, with no single factor of control being determinative, and either that (2) the person performs work that is outside the usual course of the hiring entity’s business, or the work performed is outside the place of business of the hiring entity, or the worker is responsible for the costs of the place of the business where the work is performed, or that (3) the person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed. The bill would apply the new test to all pending claims, whether in civil court or as an administrative action, filed on or after January 1, 2018, that relate to the classification of workers in this state.
This bill would declare that it is to take effect immediately as an urgency statute.
Vote: MAJORITY2/3   Appropriation: NO   Fiscal Committee: YES   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 (Dynamex) by overturning 29 years of precedent established in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341.
(b) The decision created a new, one-size-fits-all and far more restrictive ABC 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) Prior to this decision, the ABC test never existed in California statute or regulation.
(d) Such a momentous policy change should not be made by judicial fiat; instead, it should be made by the Legislature.
(e) Accordingly, the Legislature acted by passing Assembly Bill 5 (Chapter 296 of the Statutes of 2019), thereby codifying the Dynamex decision, as well as 57 carveouts for various industries, professions, and businesses.
(f) With the exception of independent contractor relationships within the various industries, professions, and businesses that received a carveout in Assembly Bill 5, most freelancers no longer have the freedom to work as independent contractors.
(g) Codifying the Dynamex decision with carveouts for some industries, professions, and businesses was not the only option available to the Legislature. The Legislature could have acted to protect the livelihood of the millions of Californians who choose to work as independent contractors and whose livelihoods were put at risk by the Dynamex decision.
(h) Assembly Bill 5 represents a lost opportunity for independent contractors and other freelancers by eliminating the choice that more and more Californians are making for their work and quality of life.
(i) The Dynamex decision and Assembly Bill 5 do not accurately reflect today’s economic and worklife balance realities, including the changing demands of the modern workplace.
(j) Of the 22 states that utilize an ABC test, only California and Massachusetts apply the ABC factors in such a narrow and inflexible way, and only 7 apply these factors for wage and hour purposes, while all others apply an ABC test for unemployment insurance purposes only.
(k) Economic freedom is foundational to the American way of life, and the Dynamex decision and Assembly Bill 5 delivered a destructive blow to this foundation.
(l) The right to earn a living is a natural right reserved to the people, and the Dynamex decision and Assembly Bill 5 undermine this natural right.
(m) According to numbers provided by the Legislative Analyst’s Office, Assembly Bill 5 threatens the livelihoods of roughly one million independent contractors who will no longer be able to work as freelancers.
(n) It is intent of the Legislature that Senate Bill 806 overturn the Dynamex decision and repeal and replace Assembly Bill 5 with a broad, flexible and workable test for determining independent contractor status.
(o) It is also the intent of the Legislature that the new ABC test in Senate Bill 806 provide maximum flexibility in allowing for independent contractor relationships in order to ensure that all those industries, businesses, and professions that legally and appropriately enjoyed independent contracting relationships prior to the Dynamex decision and Assembly Bill 5 can continue to do so now and in the future.
(p) It is also the intent of the Legislature that, for any industry, profession, or business that had legally and appropriately enjoyed independent contractor relationships prior to the Dynamex decision and Assembly Bill 5, but that may struggle to meet the new ABC test in Senate Bill 806, subsequent legislation to amend Senate Bill 806 shall be enacted to ensure that others can continue to enjoy independent contracting relationships.

SEC. 2.

 Section 2750.3 of the Labor Code is repealed.

SEC. 3.

 Section 2750.3 is added to the Labor Code, to read:

2750.3.
 (a) For purposes of this division, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor, unless the hiring entity demonstrates that the person meets both the requirement of paragraph (1) and the requirement of either paragraph (2) or (3):
(1) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact. For purposes of this paragraph, a preponderance of factors, with no single factor of control being determinative, shall determine whether a worker is free from the direct control of the hiring entity.
(2) The person performs work that is either outside the usual course of the hiring entity’s business, or that the work performed is outside the place of business of the hiring entity, or the worker is responsible for the costs of the place of the business where the work is performed.
(3) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
(b) Subdivision (a) shall apply to all pending claims, whether in civil court or as an administrative action, filed on or after January 1, 2018, that relate to the classification of workers in this state.

SEC. 4.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
Due to the unprecedented disruption of the economy because of the COVID-19 virus outbreak, it is necessary that this measure take effect immediately.