As business owners and members of the labor and employment law community know all too well, California’s AB 5 went into effect on January 1 of this year. The law imposed the “ABC test” for determining whether a worker should be classified as an employee or an independent contractor. AB 5 also included a number of “exceptions” to the ABC test, which, if proven by the hiring entity, allow for application of the earlier “Borello” test for determining independent contractor status. The Borello test focuses primarily on the right to control the manner and means by which a task is accomplished. On September 30, 2020, Governor Newsom signed AB 323, which provides newspaper carriers a one-year reprieve from AB 5’s application. Therefore, through at least 2021, the Borello test will apply to these workers.
AB 5 Exceptions
Not surprisingly, much of the debate over AB 5 focused on whether a particular business or occupation would qualify for an exception. One such occupation was newspaper carriers – those who deliver the paper to homes and businesses. Newspaper carriers have long-been established as independent contractors in California. When AB 5 was being considered back in 2019, the newspaper publishing industry warned that converting these workers to employees would doom their industry. At the eleventh hour, those carriers were given a one-year “extension” under AB 5 – the ABC test would not be applied to those workers until January 1, 2021.
The bulk of AB 5 went into effect on January 1, 2020. Within a week, lawmakers introduced bills to amend or even repeal the law. Eventually, those efforts were reduced to two bills: AB 2257 and AB 323.
On September 4, 2020, Governor Newsom signed AB 2257, which made substantial changes to California’s independent contractor law, AB 5. Littler’s Workplace Policy Institute (WPI) has previously reported extensively on this important development, including creating a legislative format version of the law, and publishing an exhaustive report, podcast, and a webinar.
AB 2257 introduced many new “exceptions” to AB 5, again allowing the application of the Borello test to various occupations. AB 2257 did not, however, address the status of newspaper carriers. Under the terms of that law, their exception was still set to expire on January 1, 2021. The second bill, AB 323, does provide for another one-year extension for newspaper carriers.
Now that Governor Newsom has signed AB 323, newspaper carriers—for now—may still be subject to the Borello test to determine their status. However, the law provides for only a one-year extension of this exception. If no further legislative action is taken, newspaper carriers will be subject to the ABC test as of January 1, 2022.
It is widely anticipated that further efforts will be undertaken in 2021 to make additional amendments to AB 5. It is likely that the issue of whether newspaper carriers may continue to be classified as contractors will once again be an important part of that debate.
WPI will report on future developments in this area.