Legislative Update: AB 5 (Lawyers as Independent Contractors)

If you work as a contract lawyer—or if you hire contract lawyers—you will be interested in AB 5.  AB 5 impacts the determination of who qualifies as an independent contractor.

In April 2018, the California Supreme Court issued an opinion in Dynamex Operations West, Inc. v. Superior Court, 4 Cal. 5th 903 (2018).  Dynamex changed the standard that employers must use to distinguish between common law employees and independent contractors for wage order purposes.  The new standard—referred to as the ABC test—places the burden on the employer to establish that an individual is an independent contractor by establishing each of three factors:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

AB 5 would codify Dynamex.  There has been a concern, however, that under Dynamex’s ABC test, contract lawyers will be deemed employees, and not independent contractors, of the law firms for which they provide services.  To address this, AB 5 carves out an exception for lawyers (among other professionals).  See proposed Labor Code § 2750.3(b)(3).

The bill has been approved by the legislature and it will shortly be sent to the governor, who is expected to sign it.  The text of AB 5 is available here.