A major fight is underway this morning in the State Capitol in Sacramento to further clarify “what is an employee” in California. Assemblywoman Lorena Gonzalez Fletcher, D-San Diego, will introduce legislation to add to state law a stricter “ABC test” for defining employees. The test, adopted unanimously by the California Supreme Court this spring, threw nearly three decades of legal precedent up in the air and generated intense push back from the business community.
The bill would strengthen rules that make it harder for employers to classify workers as contractors and limit their rights under state labor laws. The coming battle between labor and business over the issue poses an early political challenge for incoming Gov. Gavin Newsom, who was elected with major backing from unions but has strong ties with the tech industry from his rise through San Francisco politics. The court set a new set of rules on judgment whether the company can use the “Contractor” process. The Rules states that workers can only be classified as independent contractors if:
(A) They are “free from the control and direction” of the company that hired them while they perform their work.
(B) Their work falls “outside the usual course” of the hiring company’s business.
(C) They have their own independent business or trade beyond the job for which they were hired.
Business groups immediately raised alarms and lobbied the Legislature to intervene. They estimate that nearly 2 million Californians, from truck drivers to construction workers to hairdressers, are classified as independent contractors. If more of them are declared employees, companies are facing increased expenses for salaries, benefits and regulations, such as minimum wage and overtime. Major industries in California are headed for major change and additional costs to do business if the rules become law in California.