Worker Status: Employees and Independent Contractors

AB 5 codified the California Supreme Court's Dynamex Operations West v. Superior Court (2018) decision, establishing the "ABC test" as the standard for determining worker classification. Under this test, a worker is presumed to be an employee unless the hiring entity proves: (A) the worker is free from control, (B) performs work outside the usual course of the hiring entity's business, and (C) is engaged in an independently established trade. The law affected an estimated 4.5 million self-employed and independent contractors across 600+ professions. Over 100 professions received exemptions, including doctors, lawyers, accountants, real estate agents, and certain freelance writers. Gig economy companies (Uber, Lyft, DoorDash) responded with Proposition 22, which California voters approved in November 2020 (58.6% yes) to exempt app-based drivers. The law addresses an estimated $7 billion annually in unpaid payroll taxes from worker misclassification (per CA EDD). Legal challenges continue: the California Trucking Association sued under federal preemption (FAAAA), and Prop 22 faced constitutional challenges reaching the California Supreme Court. The law represents California's most significant labor legislation since the 1930s.