Understanding California’s AB5 Law

California Assembly Bill 5 (AB5) has created a lot of controversy since its signing by Governor Newsom in September 2019 and more so since its implementation on January 1st, 2020. Ostensibly meant to provide additional rights and protections to workers who were historically considered independent contractors, this bill’s terms have both workers and employers concerned for various reasons.

Initially stemming from a 2018 Supreme Court of California case by the name of Dynamax Operations West, Inc. v. Superior Court, the guiding principle behind AB5 is that most people who work on a gig basis are effectively employees of the companies they perform gig work for but are not treated as such under state law. Now, workers in California are presumed employees and are granted all the rights and protections an employee receives under state and federal law. Additionally, employers are responsible for proving that a gig worker does not qualify as an employee.

Setting the Precedent

In Dynamax Operations West, Inc. v. Superior Court, the court established a three-part test that employers must use to prove whether a worker is an independent contractor. Specifically, a company must establish the following criteria for a worker to be exempt from state and federal employment protections:

  • The worker does not receive any direction from the company regarding how and when they perform services
  • The tasks the worker performs fall outside the normal scope of business the company engages in
  • The worker is a professional – typically a licensed one – who works independently in the same business or trade

If a company cannot prove these criteria, it would be required to treat the worker as an employee. This means it must provide a minimum wage, reimbursement for certain expenses, rest breaks, and various other benefits guaranteed under California state law.

Benefits and Drawbacks of AB5

At first glance, AB5 seems like a good thing for workers in California, especially those in the gig economy who previously had very few employment protections. However, many gig workers prefer the freedom and flexibility of gig work to the regimented nature of regular employment. Therefore, being considered an employee may not be ideal for every worker. In the same vein, many companies in California that depended on flex labor to keep margins low and businesses operational are now struggling to find quality labor at a price they can afford.

While certain types of businesses like insurance companies and realtors are exempt from AB5’s requirements, employers in the California warehousing industry are facing significantly increased costs and staffing difficulties due to the benefits mandated by this law. Fortunately, HapiGig may have a solution for any warehouse business looking for affordable flex labor.

The key difference between HapiWorkers and other flex laborers is that HapiWorkers are full-time W2 employees. HapiGig sends them to fulfill the flex labor needs of every HapiEmployer on the platform. This way, warehouse managers in California don’t need to worry about complying with the AB5 law when hiring flex labor.

If your warehouse depends on flex labor to stay operational, the new California law regarding independent contractors doesn’t have to set your business back. Get in touch today to see how HapiGig could help fill flex labor needs in your warehouse.