What is California Assembly Bill 5 (AB5) and how will it affect independent contractors?

What is California Assembly Bill 5 (AB 5)?

California Assembly Bill 5 stems from the California Supreme Court Dynamex decision, issued in April 2018. In the Dynamex decision, the Supreme Court issued a new test, known as the “ABC test,” for determining whether workers are classified as independent contractors or employees under the California wage orders. California’s AB 5 bill codified this ruling, extending it to additional claims and creating dozens of exemptions.


What professions are exempt from AB5?

The bill arbitrarily exempts a long list of specified professions from the application of Dynamex. For example, AB 5 exemptions include certain health care professionals, and real estate salespeople, but also barbers, dog walkers, yard workers, and milk delivery drivers. Notably absent from exemptions are app-based rideshare and delivery drivers, whose entire work model is reliant upon an independent contractor status that affords them the flexibility and freedom to choose when, where and how long they work.


How will AB 5 affect consumers?

It’s highly uncertain what, if anything, will change when AB 5 goes into effect. It will likely take years of litigation to fully understand the law’s impact. If companies are forced to reclassify independent contractors as employees, it could negatively impact the cost and availability of services. For example, rideshare and food delivery platforms would likely be forced to cut driving opportunities, and increase prices to accommodate the new changes. This restructuring would likely also result in limited access to these services – likely only during certain hours and in more densely populated areas.