Letter of Opposition to the California Senate re: AB 5

Thursday, September 5, 2019 - 5:15pm

The Honorable Toni Atkins
President Pro Tempore
California State Senate
State Capitol
Sacramento, CA 95814

Dear Senator Atkins:

On behalf of the U.S. Chamber of Commerce, I urge you and your colleagues to oppose A.B. 5, a bill that would amend California’s Labor and Unemployment Insurance codes to severely restrict the ability of employers to utilize the services of independent contractors.  The bill as written threatens to undermine longstanding, legitimate business relationships by codifying the California Supreme Court’s misguided 2018 decision in Dynamex Operations West, Inc. v. Superior Court.

That decision abandoned a relatively stable eleven-factor test for determining employment status established in the 1989 S. G. Borello & Sons, Inc. v Dept. of Industrial Relations case (the Borello test).The Dynamex court arbitrarily replaced the Borello test with the so-called ABC test that several states have adopted.  The ABC test typically requires that a purported employer satisfy all three of the following conditions in order prove an individual is not an employee:
 
(A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
 
(B) the worker performs work that is outside the usual course of the hiring entity’s business or that the work performed is outside all the places of business of the hiring entity; and

(C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

In Dynamex, however, the court deliberately removed the latter element from part B of its new standard, which will make it exceptionally difficult to classify an individual as an independent contractor unless that person has essentially no connection to the employer’s business. A.B. 5 would enshrine that restrictive standard into law, and in doing so it would jeopardize many business models that rely on individuals who voluntarily and legitimately operate as independent contractors. 

The U.S. Chamber of Commerce urges you to oppose this bill and find a more reasonable approach to defining independent contractor relationships under state law.

Sincerely, 

Sean P. Redmond
Executive Director, Labor Policy