California State Assembly in Session. (Photo: Kevin Sanders for California Globe)
AB 5 Was Repealed and the Legislature Didn’t Create the Problem
It was the California Supreme Court that caused the problem in the first place by issuing its Dynamex decision
By Chris Micheli, February 28, 2023 2:54 pm
Did this 2-part headline get your attention? When did the Legislature repeal AB 5? And, how did the Legislature not create the problem? As a self-professed “legislative geek,” I wanted to set the record straight about AB 5 and worker classification in California.
First, here are the short answers to the two questions posed: AB 5 was repealed by AB 2257, that replicated AB 5’s language elsewhere in the Labor Code and added dozens more exemptions from the ABC Test. And, it was the California Supreme Court, rather than the Legislature, that caused the problem in the first place by issuing its Dynamex decision.
The issue of proper worker classification has been a problem for decades at both the federal and statute levels, with different guidance among numerous government agencies depending upon the reason for classification – tax or labor law compliance. California has not been any different. After decades of conflicting state agency guidance, the state’s high court issued its decision, followed by the legislative branch’s enactment of AB 5.
The “problem,” at least from the employer perspective, began when the California Supreme Court issued its 7-0 decision in Dynamex Operations West v. Superior Court. It is that high court decision that created the “ABC Test” in this state, which neither executive branch agencies nor the Legislature ever considered. In other words, even if AB 5 had never been enacted, the “law of the land” would still have been the ABC Test.
This is why I always clarify that the Legislature did not create this problem. The state’s highest court did when it issued its decision that adopted the nearly impossible to meet ABC Test to ensure a worker is properly classified as an independent contractor. Unfortunately, there has always been confusion about this because many claim that the Legislature created the ABC Test because they technically codified the ABC Test in statute.
Moreover, again speaking technically, AB 5 was repealed by a subsequent bill, AB 2257. So, while many employers and workers know AB 5, the statute it created no longer exists. In other words, many incorrectly claim AB 5 as the basis for the adverse impact on workers and businesses.
Again, however, AB 5 was repealed by the enactment of AB 2257. Many businesses and professions are thankful for the Legislature’s enactment of AB 5, and then of AB 2257. Why would that be? AB 5 originally created 57 statutory exemptions from the strict ABC Test, as the Legislature recognized that the ABC Test was too broad to be applicable across the board.
As a result, those occupations and professions who have an exemption continue to operate under pre-Dynamex law (i.e., the Borello case factors). Thereafter, when AB 2257 was enacted, that bill added 52 more exemptions in the Labor Code. Because of AB 2257, 109 exemptions from the ABC Test are now codified.
From my perspective, those critical of AB 5 fail to recognize that the ABC Test was in place before the enactment of AB 5 and the Dynamex decision would apply to everyone. Instead, in AB 5 and AB 2257, the Legislature thankfully exempted 109 businesses, professions, and occupations from the onerous ABC Test.
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While what you say is technically correct (though the 109 number is suspicious to me, having been through these laws extensively) it didn’t have to play out this way. The legislature, rather than codifying the ABC test could have instead chosen to codify the Borello test in a simple and straightforward way. After all the courts “interpret” laws, they don’t create them. The legislature is supposed to lead them not follow them when it comes to laws. As it is, AB2257 made a real mess of figuring out when Borello applies and doesn’t apply, when they could have just said Borello always applies and we don’t use the ABC test. Consequently, many independent contractors are now out of work. Maybe they didn’t start it, but the legislature certainly contributed to it, when they didn’t have to.
I appreciated Chris Micheli’s clarification because I am not a lawyer or a legislative expert as he is. But as an observer of how this all went down I would go even farther than Tom: The pro-union super-majority Dem legislature not only contributed to the damage of the court’s decision by passing AFL-CIO-written AB5, but looked at the decision as a golden opportunity and EMBRACED it. Thus the Dem legislature and certain Dem legislators such as former Asm Lorena Gonzalez earned the public’s disdain.
It was also unclear to me what exactly AB2257 did to correct or “repeal” the mess. I noted the piecemeal token exemptions for, say, truckers and actors and others, but it was never clear if the damage to independent workers created by AB5 had been entirely removed.
AB2257 contains most of the original AB5 language with some clarifications and additions. It “repeals” labor code 2750.3 (AB5) and replaced it with labor code 2775-2787 (AB5). Everyone still calls it AB5 because the bill lives in infamy. It’s mostly the same language and adds a handful of new exemptions for a chosen few, however many of these so-called exemptions are partial and come with caveats and fine print. It’s a myth that the exemptions provide total relief for the professions named. There are hundreds of categories of professions still left out in the cold.
PS. Typo in my previous reply. Labor code 2775-2787 is AB2257, not AB5. AB5 was labor code 2750.3 as I mentioned.
Thank you so much for your reply and further explanations.
Sheesh this is just pathetic. I have so much to say about this. First of all, he’s technically correct that AB5 (labor code 2750.3) was repealed and replaced by Labor Code 2775-85, aka AB2257. His assumption about Dynamex being the problem and not the legislature is erroneous. The ABC test of the Dynamex decision applied to wage orders only (meals, minimum wage, overtime, breaks). With AB5, Lorena Gonzalez expanded the ABC test beyond the wage orders to include all provisions of the labor code including the unemployment insurance code and worker’s compensation. Most of the high end professions like doctors and lawyers are not W2 wage order type of professions, therefore the ABC test of Dynamex didn’t apply to them in the first place. It is a complete ruse and lie for anyone to say that non-wage-order professions needed exemptions from the Dynamex ABC test. They needed exemptions from AB5 once it passed because it includes all provisions of the labor code, not just wage orders. The legislature is completely and totally responsible for detonating the careers of hundreds of thousands of independent professionals!! Don’t blame it on Dynamex. And don’t prop up AB5 as some kind of innocent bill. In other words, don’t piss on our legs and tell us it’s raining!!
I appreciate the author’s stance toward the ABC test, but unsure why he gives the legislature a pass. His statement that “the Dynamex decision would apply to everyone” is at best misleading. As you mention Karen, Dynamex was limited in scope (one of multiple tests in the wage order context). The CA legislature unilaterally opted to go much further by codifying and expanding the scope of the ABC test to cover a lot more than wage orders. I also note the ABC test itself as set out in AB2257 is identical to AB5. A non-repeal repeal, though the exemptions certainly changed/grew in AB2257. To say “they [CA Supreme Ct.] started it” minimizes/ignores the legislature’s responsibility for the ABC headache in California.