What Is the New Independent Contractor Law in California?

May 2021

For many years, workers who were employed as independent contractors in many California industries had to do without benefits like workers’ compensation insurance, paid sick leave, and overtime pay. Under federal law, these independent contractors are also not allowed to join unions that help to make working conditions better. As a result of this, a new law has been passed in California that changes the criteria by which an employee is defined as either an employee or an independent contractor. This law is called Assembly Bill 5, and it became effective on January 1, 2020. The new law is based on a Supreme Court decision that makes it more difficult for any employer to classify an employee as an independent contractor.

Why Assembly Bill 5 Was Needed

In the state of California in particular, Assembly Bill 5 was needed because there are many workers who perform important services but who are denied basic employment rights because too many employers make more money by classifying them as independent contractors. The entertainment industry, trucking, and translating services are popular endeavors in California, but nearly all of these employees have historically been independent contractors who have virtually no rights as employees. Assembly Bill 5 changes the criteria so that many of these employees will now be considered full employees under the law and will be eligible for related benefits. This can make a huge difference for them financially.

The Benefits and Potential Disadvantages of Assembly Bill 5

Although Assembly Bill 5 expands the rights and benefits available to many employees who were formerly considered independent contractors, it makes things more difficult for many employers. It has been estimated that changing the status of contract workers to that of full employees may increase labor costs for employers by as much as 30 percent due to paid sick leave, workers’ compensation insurance, overtime, and paid rest breaks required by law. In addition, some workers actually prefer to keep their independent worker status. For example, some trucking employees would rather remain independent and be able to transport loads for multiple companies rather than be classified as full employees of only one trucking company.

Call to Schedule a Consultation With a California Employment Law Attorney Today

If you are an employer who wants to understand the new independent contractor law, call to schedule a consultation with a California employment law attorney today. The legal professionals at the Straggas Law Group, APC understand the applications of the new Assembly Bill 5 law and can help you as an employer to understand how it may apply to you. We serve the cities of Irvine, Newport Beach, Santa Ana, Costa Mesa and surrounding Orange County communities. Visit our website at straggaslaw.com or give us a call at 949-660-9100 and let us answer any questions you may have.

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