Proposed California law on contractors versus employees gets key OK despite strong opposition

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After dozens of workers testified for and against a bill regulating who is an employee versus a part-time contractor, it passed through a California Senate committee July 10, despite opposition from some industries and lawmakers.

Assembly Bill 5, having already passed a vote in the Assembly, gained the votes to pass the Senate Labor, Public Employment and Retirement Committee and will now be heard in the Senate Appropriations Committee.

The bill codifies and clarifies a landmark California Supreme Court decision from last year that establishes a three-part test to determine if workers are employees or contractors. One of the major goals of the bill is to end employers misclassifying workers as contractors to avoid paying them benefits and covering other employment-related costs.

In the original California Supreme Court decision, workers can only be classified as independent contractors if all three situations are true:

A: The worker is “free from the control and direction” of the company that hired them while they perform their work.

B: The worker is performing work that falls “outside the hiring entity’s usual course or type of business.”

C: The worker has an independent business or trade beyond the job for which they were hired.

If a worker does not satisfy all three steps, they would be considered employees and treated as such under the law.

The bill is intended to protect workers from abuse, but some workers, like truckers, do not necessarily want to be classified as employees, saying they value their independence to contract as they see fit.

Many industries, including physicians, engineers, insurance agents, architects, real estate agents, dentists and lawyers, received exemptions from the bill’s author, Assemblywoman Lorena Gonzalez, D-San Diego, to act as independent contractors.

The exemption process was the target of Sen. Mike Morrell, R-Rancho Cucamonga, vice chairman of the committee.

“I think it’s going to be a blow to our economy,” Morrell said of the bill. “With all these carve-outs, you are picking winners and losers.”

“That’s offensive to me,” Gonzalez said in a somewhat heated exchange. “I’m not sitting around saying, ‘I like my real estate agent; I think I’ll exempt her.’ … The carve-outs at this point are things that have been debated in these halls, passed in these halls.”

She did concede later in the hearing that “We probably won’t fix it for everybody this time,” referring to perfecting the provisions for every job type statewide.

Dozens of Lyft and Uber drivers spoke in support of the bill during the meeting, hoping the bill will help classify them as employees with the associated benefits.

Opposition testimony included Thien Chan, an independent heavy commercial truck owner-operator. He said he values not being tied to one company as an employee.

“If I were an employee, I would not be able to pick the jobs I go on,” he said.

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