Following passage and signature into law of California Assembly Bill 5 (“AB-5”), retailers should be aware of how the new law affects whether they can classify workers as independent contractors.

AB-5 codifies a decision last year by the California Supreme Court in Dynamex Operations West, Inc. v. Superior Court of Los Angeles establishing the “ABC test” for determining whether workers can be classified as independent contractors for purposes of wage order claims, and extends the test beyond wage order claims to the California Labor Code, generally.  The new law takes effect January 1, 2020.

Although AB-5 is making headlines for its potential impact on the gig economy, the law may impact any business that uses independent contractors.  For retailers, this may include workers ranging from freelance artists to models.

Under AB-5 and the “ABC test,” a worker is considered an employee rather than an independent contractor unless the