Seyfarth Synopsis: The hotly contested AB 5 was put on hold, but is widely expected to be revived before the end of the legislative session.
On August 13, 2019, the California Senate Appropriations Committee held a short hearing on Assembly Bill 5. AB 5, if enacted into law, would codify the “ABC Test” for employee status adopted in the California Supreme Court’s 2018 Dynamex v. Superior Court decision, and would thus further hinder the efforts of businesses to use independent contractors. While there was little substantive discussion of the bill, the hearing culminated in a potentially significant result.
The Senate Appropriations Committee referred AB 5 to the “suspense file,” because of if its significant fiscal impact, based upon testimony from a representative of the California Finance Department. This action places a hold on the bill unless the Chair of the Appropriations Committee decides to return the bill to the Committee. Referral to the suspense file, in effect, functions as a veto if a bill is not returned to the Committee.
While this kind of action is often the death knell for many bills, the significant support for this bill from many legislators, including its influential author, Lorena Gonzalez Fletcher (D-San Diego), Chair of the Assembly Appropriations Committee, enhances the bill’s chances of being returned from suspense and continuing through the legislative process.
In fact, the Senate President pro tem, Toni Atkins (D-San Diego) fully expects AB 5 to move forward. And Atkins, much to the chagrin of gig economy companies, expressed skepticism that the bill eventually signed into law would contain a provision specifically addressing the status of gig workers, as negotiations between business and labor interests appear primed to continue into the next legislative session, stating in an interview with CapRadio’s Ben Adler “I have no doubt that we will discuss this into the next year.”
With that said, AB 5 will need to make it through the legislative process by the September 13th close of the legislative session, and must then be submitted to the Governor for his approval or veto by October 13th, lest it remain in suspense-file purgatory.
Companies utilizing contractors should continue to keep a close eye on this legislation and how it may affect their current operations, as it has gone through a number of changes from its initial proposed form. Seyfarth will keep you apprised as the legislative session continues—stay tuned!