California Assembly Bill 5 – Update
Sept. 25, 2019
On Sept. 18, 2019, California Governor Newsom signed California Assembly Bill 5 (“AB 5”) into law. The law goes into effect Jan. 1, 2020.
As we previously reported, AB 5 changes the way that certain workers are classified and paid in California, making it more difficult for employers to classify workers as independent contractors rather than as employees. The bill codifies the “ABC Test” adopted by the California Supreme Court in the Dynamex decision, which creates a presumption that workers are employees rather than independent contractors unless the employer can establish:
- That the worker 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;
- That the worker performs work that is outside the usual course of the hiring entity’s business; and
- That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
The bill has implications for a wide array of industries in California, including the entertainment industry. In addition to the impacts of the bill on the use of independent contractors and freelancers, questions have arisen about how the bill might affect the use of loan-out corporations. A number of major industry unions and guilds have recently made public statements that they do not anticipate AB 5 will have an impact on the proper use of loan-out corporations, consistent with the long-standing and accepted practice in the entertainment industry. Cast & Crew does not currently anticipate modifying our practices with respect to loan-outs. We do expect there to be ongoing activity regarding the evolution of this legislation, as well as its interpretation and application. We will continue to monitor such developments and provide updates to our customers.
If you have any questions, please email Compliance@castandcrew.com.
The proceeding information is provided for informational purposes only, should not be construed as or relied upon as legal advice and is subject to change without notice. If you have questions concerning particular situations, specific payroll administration or labor relations issues, please contact your counsel.