Support for AB 5 and its “ABC test” aimed at classifying more workers as employees rather than independent contractors appears to be growing due to the Coronavirus pandemic. The federal, state and local government restriction on businesses and mobility have vastly limited the availability of work. Independent contractors, who are not entitled to unemployment benefits or any paid sick leave benefits under the recently passed Families First Coronavirus Response Act, are expected to be hit particularly hard by this downturn of business.
Employees who are layed off or furloughed are entitled to paid sick leave and unemployment benefits under state law. Further, these employees will be entitled to substantial increases of paid sick leave under the federally enacted Family First Coronavirus Act signed by the President on March 18, 2020. On the other hand, independent contractors are not entitled to any of these benefits and have largely been forgotten in legislative efforts.
California Assemblywomen Lorena Gonzalez, D-District 80, continues to advocate for more workers to be classified as employees under AB 5, saying “I authored AB 5 precisely for the moment we are in now,” referencing the large scale closure of businesses and loss of employment due to the Coronavirus. The Los Angeles and Oakland city attorneys also cited the pandemic in an amicus brief to the Ninth Circuit urging the court to lift an injunction blocking the use of AB 5’s ABC test in the trucking industry. The attorneys cited the lack of benefits and the sizeable independent incomes to cover their own care causing truckers to be forced to work despite illness, putting the public health at risk.
Even Uber and Lyft, who achieved multi-billion dollar valuations by classifying drivers as independent contractors to avoid providing benefits such as sick pay and who have adamantly opposed AB 5, have announced that they will provide funds to compensate drivers who have been quarantined or diagnosed with Coronavirus, in response to pressure from those who say they cannot afford to take time off work even if they are sick.
Many states, such as New Jersey, have already passed emergency relief acts that would permit independent contractors to file claims for lost earnings for the same reasons employees are already allowed to claim unemployment benefits.
It appears that the statewide closures have increased support for AB 5’s ABC test and highlighted the benefits of more workers being classified as employees rather than independent contractors.
If state agencies adopt Assemblywomen Gonzalez’s opinion that many workers are being misclassified as independent contractors and are being improperly denied employment benefits, businesses hiring independent contractors need to be certain they can pass the ABC test. If a misclassified worker challenges his employment status to seek benefits, these agencies are likely to favor classifying the workers as an employee. A finding that a business has misclassified workers may result in substantial liability in the form of unpaid wages and penalties.
RPNA will continue to monitor these developments and provide important updates to our clients as appropriate. If you have any questions about your obligations under federal, state or local, emergency Coronavirus response legislation or AB 5 please contact the attorneys at RPNA at (818) 992-9999.
