Since the passage of California Assembly Bill (AB) 5 in 2019, there have been subsequent legal challenges and revised legislation that continues to shape the status of independent contractors and related employment law issues in California.  Keeping track of all the cases and exemptions related to AB 5 is almost as difficult as determining who can be an independent contractor.

AB 5, which became effective in January 2020, codified and broadened the California Supreme Court 2018 decision Dynamex Operations West, Inc v. Superior Court, in which it set forth the “ABC” test for determining whether a worker should be classified as an independent contractor. Under the test a worker may be classified as an independent contractor if the employer can satisfy the following criteria:

•  (a) the worker is free from control and direction in the performance of services; and

• (b) the worker is performing work outside the usual course of the business of the hiring company; and

• (c) the worker is customarily engaged in an independently established trade, occupation, or business.

The following are some of the recent developments relating to AB 5 and independent contractors in the Golden State.

AB 5 and Its Retroactive Application

In January 2021, the California Supreme Court held in Vazquez v. Jan-Pro Franchising International, that its Dynamex decision applies retroactively to independent contractor classification claims and decisions/conduct pre-dating Dynamex.

AB 5 and Federal Preemption

Soon after the passage of AB 5, motor carriers challenged its application to their work. Initially, a preliminary injunction preventing AB 5’s application to motor carriers was granted by the federal district court.  That decision was short-lived, however, when in April 2021, the 9th Circuit panel held that the application of California Assembly Bill 5 (AB 5) to motor carriers is not preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA).

That 9^th Circuit Court decision became final when in 2022 the U.S. Supreme Court declined to review that decision. At this juncture, AB 5 requirements apply to motor carriers in the state.

AB 5 and First Amendment

In 2022, the U.S. Court of Appeals for the 9^th Circuit held that AB 5’s requirements pertaining to independent contractors did not violate the First Amendment. A company that handled signature collection for political issues, argued that applying AB 5 to individuals knocking on doors and gathering signatures discriminated against them based on their free speech rights. The 9^th Circuit disagreed and upheld a denial of a preliminary injunction against the enforcement of AB 5.

AB 5 and Proposition 22

In 2020, California voters approved Proposition 22, also known as the “Protect- App-Based Drivers and Services Act,” which allows app-based ride-share and delivery driver companies to hire drivers as independent contractors if certain conditions were met. 

This year, the California Court of Appeal upheld Proposition 22, despite challenges.

AB 5 and Exemption Legislation

And since the passage of AB 5, several legislative bills have passed, that exempt certain professions from the “ABC” test, including newspaper distributors, manicurists, and construction trucking subcontractors.

Recent legislative and judicial history both demonstrate that the employment issues arising from AB 5 and its application in the workplace remain challenging and ever-changing.