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AB-71 Employment standards: independent contractors and employees.(2019-2020)

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Date Published: 12/03/2018 09:00 PM


Assembly Bill No. 71

Introduced by Assembly Member Melendez

December 03, 2018

An act to amend Section 2750.5 of, and to add Section 2750.7 to, the Labor Code, relating to employment.


AB 71, as introduced, Melendez. Employment standards: independent contractors and employees.
Existing law prescribes comprehensive requirements relating to minimum wages, overtime compensation, and standards for working conditions for the protection of employees applicable to an employment relationship. Existing law makes it unlawful for a person or employer to avoid employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor. Existing law authorizes the Labor and Workforce Development Agency to take specified actions against violators of these provisions, authorizes civil penalties, and authorizes the Labor Commissioner to enforce those provisions pursuant to administrative authority or by civil suit.
Existing case law establishes a three-part test, known as the “ABC” test, for determining whether a worker is considered an independent contractor for purposes of specified wage orders. Under this test, a worker is properly considered an independent contractor only if the hiring entity establishes; 1) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for performance of the work and in fact; 2) that the worker performs work outside the usual course of the hiring entity’s business; and 3) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
This bill would, instead, require a determination of whether a person is an employee or an independent contractor to be based on a specific multifactor test, including whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired, and other identified factors. The bill would make related, conforming changes.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


 Section 2750.5 of the Labor Code is amended to read:

 There is a rebuttable presumption affecting the burden of proof that a worker 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:

(a)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.

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

(c)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.

In addition to the factors contained in subdivisions (a), (b), and (c), Section 2750.7, any 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.
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.

SEC. 2.

 Section 2750.7 is added to the Labor Code, to read:

 (a) Notwithstanding any other law, a determination of whether a person is an employee or an independent contractor for the purposes of this division shall be based on the multifactor test set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations.
(b) These factors include, but are not limited to, the following:
(1) Whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired, which is the principal factor.
(2) Whether the one performing services is engaged in a distinct occupation or business.
(3) The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision.
(4) The skill required in the particular occupation.
(5) Whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work.
(6) The length of time for which the services are to be performed.
(7) The method of payment, whether by the time or by the job.
(8) The right to discharge at will, without cause.
(9) Whether or not the work is part of the regular business of the principal.
(10) Whether or not the parties believe they are creating the relationship of employer-employee.
(c) The individual factors set forth in subdivision (b) above shall not be applied mechanically as separate tests, but shall be intertwined.
(d) The test set forth in this section shall apply to any determinations before an administrative agency or court.