Gov. Gavin Newsom (D-Calif.) recently signed Assembly Bill 5 into law, saying the new regulation would help reduce instances of worker misclassification as independent contractors, “which erodes basic worker protections like the minimum wage, paid sick days and health insurance benefits,” according to www.constructiondive.com. The new law takes effect Jan. 1, 2020.
California employers will be required to use a strict method—the ABC test—to determine whether a worker is an independent contractor or an employee entitled to the protections and benefits that come with that status. The test is expected to limit the use of independent contractors in California’s construction industry. However, there are exceptions for certain professions, such as engineers and architects.
The construction industry is divided regarding the legislation.
“We are grateful for Assemblywoman Lorena Gonzalez’s leadership on this critical issue, and to the governor for signing AB5 into law,” says Dan Langford, executive secretary-treasurer at the Southwest Regional Council of Carpenters. “AB5 will crack down on worker misclassification, which is rampant in the construction industry and violates fundamental rights like minimum wage and sick leave.”
The Associated General Contractors of California and other groups opposed some elements of AB5 and plan to continue the fight against what they view as the regulation’s more onerous elements and make it more “contractor-friendly.”
AGCC CEO Peter Tateishi said because of industry efforts, subcontractors with a state license are exempt from the “B” section of the law’s ABC independent contractor test. The “B” component requires independent contractors to offer services outside the hiring contractor’s normal scope of work. He said general contractors technically could self-perform the work they typically subcontract out, but the exemption preserves those contractor-subcontractor relationships.
AGCC still is concerned about issues related to the use of owner-operator trucking operations that bring water and materials to jobs or perform off-haul services. Effective Jan. 1, 2020, contractors no longer can use intermediaries to arrange these services and instead must have a direct relationship with the owner-operator. Effective Jan. 1, 2022, contractors will not be able to use owner-operators at all and must use a company that has employee truckers.
