On September 18, 2019, California Governor Gavin Newsom signed into law Assembly Bill 5 (“AB 5”). The law takes effect on January 1, 2020 with respect to workers’ rights under the state’s Unemployment Insurance Code, the Labor Code and wage orders of the Industrial Welfare Commission, and on July 1, 2020 for workers’ compensation claims.
AB 5 is a worker-friendly law that is expected to have widespread impact across the state by potentially reclassifying millions of California workers as employees rather than independent contractors or consultants. As announced by the California Legislature when it passed AB 5, the new law is designed to “ensure workers who are currently exploited by being misclassified as independent contractors instead of recognized as employees have the basic rights and protections they deserve under the law, including a minimum wage, workers’ compensation if they are injured on the job, unemployment insurance, paid sick leave and paid family leave.”
Companies need to determine whether their business operations are affected by the new law and, if so, they will need to take various measures, including potentially modifying their contractor arrangements and agreements.