Recordkeeping State laws

California governor signs bill to reclassify contract workers

Gov. Newsom signs bill
California Assembly Democrats

Sacramento, CA — More than a million workers in California who are classified as independent contractors will have their employment status restored under legislation signed into law Sept. 18 by Gov. Gavin Newsom (D).

Effective Jan. 1, the new law (A.B. 5) requires the state to use the three-step “ABC test” to determine whether a worker is an independent contractor. The test was first adopted by the California Supreme Court in April 2018, when it ruled unanimously in favor of drivers working for Dynamex Operations West, a package and document delivery company that had converted all of its drivers to independent contractor status.

In its decision, the court ruled that workers can be classified as independent contractors if:

  1. They are “free from control and direction” of the employer as it relates to performance of the work.
  2. Their work is performed “outside the usual course” of the hiring entity’s business.
  3. They engage in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

Independent contractors are not guaranteed safety and health protections, including paid sick leave or workers’ compensation benefits.


“We are disrupting the status quo and taking a bold step forward to rebuild our middle class and reshape the future of workers as we know it,” Assemblywoman Lorena Gonzalez (D-San Diego), who introduced the bill, said in a Sept. 18 press release. “As one of the strongest economies in the world, California is now setting the global standard for worker protections for other states and countries to follow.”

Workers who will benefit from the new law include those in janitorial services, construction, and hotel and hospitality, as well as home health care aides and delivery and ride-hail drivers, the release states.

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