Assembly Bill Aims At Protecting Small Businesses, Reducing Power of AB 5

An Assembly bill that is designed to protect small businesses from lawsuits and penalties in unemployment claims by independent contractors and reduce the power of AB 5 is due to be heard in the Assembly Labor and Employment Committee in the coming weeks.

Assembly Bill 2457, written by Assemblywoman Melissa Melendez (R-Lake Elsinore), is one of many bills that aim to protect businesses in the wake of the coronavirus. Under AB 2457, employers can no longer be fined for violating Labor Code, Unemployment Insurance Code, or Industrial Welfare Commission (IWC) Payments when someone applies who has already applied for unemployment and had been an independent contractor sometime in the past 5 years. Employees who have applied for unemployment insurance and have worked as an independent contractor since the beginning of 2020 may also not sue the employer to recover civil penalties.

Finally, Employment Development Department (EDD) audits caused by CARES Act related claim will make the EDD unable to start audits when the employee in question was under another job classification if they were self-employed or an independent contractor in the past 5 years.

All together, AB 2457 will essentially stop action from being taken against small businesses by employees who were contractors and tried to collect unemployment insurance. The entire bill would then be repealed in 2026 as it would only be a temporary aid to employers.

“Small businesses are feeling some of the harshest consequences from the shelter-in-place orders in the wake of coronavirus,” said Assemblywoman Melendez in a statement. “We as lawmakers now need to make sure they are not frivolously targeted by civil actions, penalties and fines that result from the unintended consequences of employees filing for unemployment benefits.”

By focusing on workers who were or had been independent contractors, AB 2457 weakens part of AB 5. Specifically, the bill reduces independent contractor power in legally challenging small businesses when they are in the process of receiving money from unemployment.

“AB 5 has not only been a complete disaster for the people who were self-employed and now seeking help, but for the small businesses who are now at risk of audits, fines and lawsuits,” added Assemblywoman Melendez.

While there has been no noted opposition to the bill yet, experts have said it is only a matter of time.

“There will definitely be lawmakers against it come the hearing,” explained labor lawyer Doug Gallo. “Anyone pro-AB 5 will see this as another attack on it, and unions might have a say in it too since it weakens workers rights a bit.”

“There’s some other big issues too, like the fact that independent contractors will be hurt more than helped, but for any business facing possible issues with independent contractors looking at unemployment benefits, this bill is a godsend.”

AB 2457 was originally given a hearing in March before the Employment and Labor Committee but was halted following coronavirus closures. Assemblywoman Melendez subsequently made amendments to the bill to make it more in line with coronavirus measures and to protect employers during the economic downturn.

AB 2457 is expected to be passed by the Assembly E and L committee in June.