California Assembly Bill 5 (AB5) is a state statute which codified into law the results of a Supreme Court of California case, Dynamex Operations West, Inc. v. Superior Court, which found that most workers are employees and that the burden of proof for classifying workers as independent contractors falls on the hiring entity.
The bill was first introduced in December 2018 and was passed and signed into law in September 2019. The law took effect on January 1, 2020.
AB5 codifies the "ABC test" put forth in the Superior Court ruling on the Dynamex case.
- Part A: Is the worker free from the control and direction of the hiring entity in the performance of the work, both under the contract for the performance of the work and in fact?
- Part B: Does the worker perform work that is outside the usual course of the hiring entity's business?
- Part C: Is the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity?
If the answer to all three questions is "yes," then, statutorily, the worker in question is considered an independent contractor. Failure to meet all three conditions would classify a worker as an employee, entitling them to unemployment benefits and other rights and privileges.
This simpler, three-part test replaces the eleven-part Borello Test set forth in the California Supreme Court's 1989 ruling on the case of S.G. Borello & Sons, Inc. vs. Department of Industrial Relations.
