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California Gov. Gavin Newsom on Wednesday signed into law a controversial bill that opponents say could cause thousands of independent workers to be reclassified as employees who would gain labor law protections such as workers compensation.
A.B. 5, which overwhelmingly passed the state Senate and the Assembly last week, applies what is known in labor litigation as the “ABC test.”
As detailed in the bill, employers will use this test to weigh whether a worker is an employee of the company: “(A) person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that the person is free from the control and direction of the hiring entity in connection with the performance of the work, the person performs work that is outside the usual course of the hiring entity’s business, and the person is customarily engaged in an independently established trade, occupation or business.”
Uber Technologies Inc. and Lyft Inc., companies that watchdogs groups say will be hardest hit by the new law, recently provided statements saying they intend to work with state voters on passing a law that would be a compromise and would better protect workers who want to remain independent.
The number of workers who fall outside of workers compensation is likely to rise in the future, potentially impacting workers compensation, according to a report released Thursday by the National Council on Compensation Insurance.