Well that was fast.
Assembly Bill 5—referred to by many as the Dynamex bill—was approved by both houses of the Legislature on September 17th. The Governor signed the bill the very next day. (Click here for the text of the bill.)
There had been a lot of jockeying for exemptions leading up to September 17th, with the latest addition coming on September 6th (adding psychologists and veterinarians as exempt from the ABC test).
The ABC test is now the law of the state for not just Wage Order claims, but for all the Labor Code, narrowly limiting who may be classified as an independent contractor (versus employee) in California.
Compared to the current state of the law, the new law (set to take effect January 1, 2020) broadens the scope of the ABC test beyond what the California Supreme Court decided in Dynamex Operations West v. Superior Court, 4 Cal. 5th 903 (2018)—a prior appellate court decision had held that the Dynamex ABC test applied only to claims brought under the Wage Orders, but not to broader Labor Code claims that weren’t premised on a violation of a Wage Order. See Garcia v. Border Transportation Group, LLC, 28 Cal. App. 5th 558 (4th Dist. Oct. 22, 2018), as modified (Nov. 13, 2018) (see my writeup on Garcia here).
The new law isn’t effective until January 1, 2020. Until then, Dynamex and Garcia control. For pre-2020 matters, the ABC test will apply to independent-contractor-misclassification claims for purposes of the Wage Orders only and potentially (see below) not the broader Labor Code. This means that some claims, like claims for unpaid minimum or overtime wages or violations of the meal- and rest-period provisions of the Wage Orders will fall under the Dynamex rubric, while claims that are not premised on underlying Wage Order provisions (e.g., claims for reimbursement under Labor Code section 2802) might follow the old multi-factor test under S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989), and its progeny. Again, see below.
Here’s another wrinkle that lawyers and courts will have to deal with. Statutes are usually not applied retroactively unless the statute clarifies existing law as opposed to creating new law. But there is language in this bill that can be used to argue that the ABC test has always applied to all of the Labor Code (i.e., that Dynamex and this new statute applies retroactively). In the text of the bill, after talking about the Dynamex decision and how "existing law" applies the ABC test to Wage Order claims, AB 5 includes this line: "This bill would state the intent of the Legislature to codify the decision in the Dynamex case and clarify its application." (Italics added.) And this one: “It is the intent of the Legislature in enacting this act to include provisions that would codify the decision of the California Supreme Court in Dynamex and would clarify the decision’s application in state law.” (Italics added.)
Looking solely at the Dynamex and Garcia opinions, it’s clear that the ABC test under those cases applies only to the Wage Orders. So what will courts do with the prefatory language in AB 5 that uses “clarify”? Will courts interpret that language to mean a clarification of prior decisions? Or will courts interpret that language to mean that the new law changes (“clarif[ies]”)the prior Dynamex decision’s application going forward? Who knows?
Let me know if you have another take.