Bill Text: CA AB5 | 2019-2020 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Worker status: employees and independent contractors.

Spectrum: Partisan Bill (Democrat 13-0)

Status: (Enrolled) 2019-09-11 - Senate amendments concurred in. To Engrossing and Enrolling. [AB5 Detail]

Download: California-2019-AB5-Amended.html

Amended  IN  Senate  August 30, 2019
Amended  IN  Senate  July 11, 2019
Amended  IN  Assembly  May 24, 2019
Amended  IN  Assembly  May 01, 2019
Amended  IN  Assembly  March 26, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 5


Introduced by Assembly Member Gonzalez

December 03, 2018


An act to amend Section 7500.2 of the Business and Professions Code, to amend Section 3351 of, and to add Section 2750.3 to, the Labor Code, and to amend Section 621.5 Sections 606.5 and 621 of the Unemployment Insurance Code, relating to employment, and making an appropriation therefor.


LEGISLATIVE COUNSEL'S DIGEST


AB 5, as amended, Gonzalez. Worker status: employees and independent contractors.
Existing law, as established in the case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex), creates a presumption that a worker who performs services for a hirer is an employee for purposes of claims for wages and benefits arising under wage orders issued by the Industrial Welfare Commission. Existing law requires a 3-part test, commonly known as the “ABC” test, to establish that a worker is an independent contractor for those purposes.
Existing law, for purposes of unemployment insurance provisions, requires employers to make contributions with respect to unemployment insurance and disability insurance from the wages paid to their employees. Existing law defines “employee” for those purposes to include, among other individuals, any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee, or is an employee of a person who holds or is required to obtain a valid state contractor’s license. employee.
This bill would state the intent of the Legislature to codify the decision in the Dynamex case and clarify its application. The bill would provide that the factors of the “ABC” test be applied in order to determine the status of a worker as an employee or independent contractor for all for purposes of the provisions of the Labor Code and Code, the Unemployment Insurance Code, except if a and the wage orders of the Industrial Welfare Commission, 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. The bill, notwithstanding this provision, would provide that any statutory exemption exception from employment status or from a particular obligation related to employment or where a statutory grant of employment status or a particular right related to employment applies. The bill would exempt specified professions from these provisions and instead provide that the employment relationship test for those professions or any extension of employer status or liability remains in effect, and that if a court rules that the 3-part test cannot be applied, then the determination of employee or independent contractor status shall be governed by the test adopted in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 if certain requirements are met. (Borello). The bill would exempt specified occupations from the application of Dynamex, and would instead provide that these occupations are governed by Borello. These exempt professions occupations would include, among others, licensed insurance agents, certain licensed health care professionals, registered securities broker-dealers or investment advisers, direct sales salespersons, real estate licensees, commercial fishermen, workers providing hairstyling or barbering licensed barber or cosmetology services, electrologists, estheticians, workers providing natural hair braiding, licensed repossession agencies who meet requirements described below, and those others performing work under a contract for professional services, with another business entity, or pursuant to a subcontract in the construction industry.
The bill would also require the Employment Development Department, on or before March 1, 2021, and each March 1 thereafter, to issue an annual report to the Legislature on the use of unemployment insurance in the commercial fishing industry. The bill would make the exemption for commercial fishermen applicable only until January 1, 2023.
This bill would also expand the definition of employee, for purposes of unemployment insurance provisions, to include individuals who are defined as employees pursuant to the above-described provision of the Labor Code codifying the “ABC” test. redefine the definition of “employee” described above, for purposes of unemployment insurance provisions, to include an individual providing labor or services for remuneration who has the status of an employee rather than an independent contractor, unless the hiring entity demonstrates that the individual meets all of specified conditions, including that the individual performs work that is outside the usual course of the hiring entity’s business. Because this bill would increase the categories of individuals eligible to receive benefits from, and thus would result in additional moneys being deposited into, the Unemployment Fund, a continuously appropriated fund, the bill would make an appropriation. The bill would state that addition of the provision to the Labor Code does not constitute a change in, but is declaratory of, existing law with regard to violations of the Labor Code relating to wage orders of the Industrial Welfare Commission. The bill would also state that specified Labor Code provisions of the bill apply retroactively to existing claims and actions to the maximum extent permitted by law while other provisions apply to work performed on or after January 1, 2020. The bill would additionally provide that the bill’s provisions do not permit an employer to reclassify an individual who was an employee on January 1, 2019, to an independent contractor due to the bill’s enactment.
Existing provisions of the Labor Code make it a crime for an employer to violate specified provisions of law with regard to an employee. The Unemployment Insurance Code also makes it a crime to violate specified provisions of law with regard to benefits and payments.
By expanding the definition of an employee for purposes of these provisions, the bill would expand the definition of a crime, thereby imposing a state-mandated local program.

Existing law, the Collateral Recovery Act, provides for the licensure and regulation of repossession agencies by the Bureau of Security and Investigative Services. Existing law defines a repossession agency to include any person who engages in the business or accepts employment to locate or recover collateral. Existing law permits a licensed repossession agency to only transact business with another person or entity as an independent contractor.

This bill, to ensure that independent contractor status is met, would require the repossession agency to be both free from the control and direction of the hiring person or entity, as specified, and perform work that is outside the usual course of the hiring person or entity’s business.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: YES   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) On April 30, 2018, the California Supreme Court issued a unanimous decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903. 903 (Dynamex).
SEC. 2.Section 7500.2 of the Business and Professions Code is amended to read:
7500.2.

(a)A repossession agency means and includes any person who, for any consideration whatsoever, engages in business or accepts employment to locate or recover collateral, whether voluntarily or involuntarily, including, but not limited to, collateral registered under the provisions of the Vehicle Code which is subject to a security agreement, except for any person registered pursuant to Article 7 (commencing with Section 7506).

(b)A repossession agency licensed pursuant to this chapter shall only transact business with another person or entity as an independent contractor. To ensure that this requirement is met, both of the following shall be satisfied:

(1)The repossession agency shall be free from the control and direction of the hiring person or entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(2)The work that the repossession agency performs shall be outside the usual course of the hiring person or entity’s business.

(c)A repossession agency shall not allow a person or entity other than the qualified certificate holder, as provided in Section 7505.1, or the owner or officer of the repossession agency, to manage the day-to-day operations, operate, control, or transact business covered by this act, except as provided in Section 7503.3.

SEC. 3.SEC. 2.

 Section 2750.3 is added to the Labor Code, to read:
2750.3.

(a)Except where a statutory exemption from employment status or an exemption from a particular obligation related to employment applies or where a statutory grant of employment status or a particular right related to employment applies, for

2750.3.
 (a) (1) For purposes of the provisions of this code and the Unemployment Insurance Code, and for the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(1)

(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.

(2)

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

(3)

(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.
(2) Notwithstanding paragraph (1), any exceptions to the terms “employee,” “employer,” “employ,” or “independent contractor,” and any extensions of employer status or liability, that are expressly made by a provision of this code, the Unemployment Insurance Code, or in an applicable order of the Industrial Welfare Commission, including, but not limited to, the definition of “employee” in subdivision 2(E) of Wage Order No. 2, shall remain in effect for the purposes set forth therein.
(3) If a court of law rules that the three-part test in paragraph (1) cannot be applied to a particular context based on grounds other than an express exception to employment status as provided under paragraph (2), then the determination of employee or independent contractor status in that context shall instead be governed by the California Supreme Court’s decision in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello).
(b) This section Subdivision (a) and the holding in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903 (Dynamex), do not apply to the following occupations as defined in the paragraphs below, and instead, for these occupations only, the employment relationship shall be governed by the test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (S. G. Borello & Sons, Inc.), or Section 7500.2 of, or subdivision (b) of Section 10032 of, the Business and Professions Code, as set forth in paragraphs (5) and (7) below. instead, the determination of employee or independent contractor status for individuals in those occupations shall be governed by Borello. The exemptions in this subdivision for health care occupations shall not apply to facilities owned or operated by the state or the University of California.
(1) A person or organization who is licensed by the Department of Insurance pursuant to Chapter 5 (commencing with Section 1621), Chapter 6 (commencing with Section 1760), or Chapter 8 (commencing with Section 1831) of Part 2 of Division 1 of the Insurance Code.
(2) A physician and surgeon surgeon, dentist, podiatrist, or psychologist licensed by the State of California pursuant to Division 2 (commencing with Section 500) of the Business and Professions Code, performing professional or medical services provided to or by a health care entity, including an entity organized as a sole proprietorship, partnership, or professional corporation as defined in Section 13401 of the Corporations Code.
(3) An individual who holds an active license from the State of California and is practicing one of the following recognized professions: lawyer, architect, engineer, veterinarian, private investigator, or accountant.

(3)

(4) A securities broker-dealer or investment adviser or their agents and representatives that are registered with the Securities and Exchange Commission or the Financial Industry Regulatory Authority or licensed by the State of California under Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing with Section 25230) of Division 1 of Part 3 of Title 4 of the Corporations Code.

(4)

(5) A direct sales salesperson as described in Section 650 of the Unemployment Insurance Code, so long as the conditions for exclusion from employment under that section are met.

(5)A real estate licensee licensed by the State of California pursuant to Division 4 (commencing with Section 10000) of the Business and Professions Code shall have their relationship governed by subdivision (b) of Section 10032 of the Business and Professions Code. If that section is not applicable, then classification shall be governed as follows: (1) for purposes of unemployment insurance by Section 650 of the Unemployment Insurance Code; (2) for purposes of workers compensation by Section 3200 and following; and (3) for all other purposes in the Labor Code by the test adopted by the California Supreme Court in the case of S. G. Borello and Sons, Inc. The statutorily imposed duties of a responsible broker under Section 10015.1 of the Business and Professions Code are not factors under the Borello test.

(6)A worker providing hairstyling or barbering services, an electrologist, an esthetician, or worker providing natural hair braiding, who is free from direction or control both under the contract for the performance of the work and in fact. For purposes of this subparagraph, “free from direction or control” includes, but is not limited to, the worker meets all of the following criteria:

(A)Sets their own rates for services performed, provided the rate is equal to or greater than two times the minimum wages for hours worked and is paid directly by their clients.

(B)Sets their own hours of work and has sole discretion to decide which clients from who they will provide services.

(C)Has their own book of business and schedules their own appointments.

(D)Uses their own funds to purchase requisite supplies used in connection with providing services.

(E)Maintains their own business license in connection with the services offered to clients.

(6) A commercial fisherman working on an American vessel as defined in subparagraph (A) below.
(A) For the purposes of this paragraph:
(i) “American vessel” has the same meaning as defined in Section 125.5 of the Unemployment Insurance Code.
(ii) “Commercial fisherman” means a person who has a valid, unrevoked commercial fishing license issued pursuant to Article 3 (commencing with Section 7850) of Chapter 1 of Part 3 of Division 6 of the Fish and Game Code.
(iii) “Working on an American vessel” means the taking or the attempt to take fish, shellfish, or other fishery resources of the state by any means, and includes each individual aboard an American vessel operated for fishing purposes who participates directly or indirectly in the taking of these raw fishery products, including maintaining the vessel or equipment used aboard the vessel. However, “working on an American vessel” does not apply to anyone aboard a licensed commercial fishing vessel as a visitor or guest who does not directly or indirectly participate in the taking.
(B) For the purposes of this paragraph, a commercial fisherman working on an American vessel is eligible for unemployment insurance benefits if they meet the definition of “employment” in Section 609 of the Unemployment Insurance Code and are otherwise eligible for those benefits pursuant to the provisions of the Unemployment Insurance Code.
(C) On or before March 1, 2021, and each March 1 thereafter, the Employment Development Department shall issue an annual report to the Legislature on the use of unemployment insurance in the commercial fishing industry. This report shall include, but not be limited to, reporting the number of commercial fishermen who apply for unemployment insurance benefits, the number of commercial fishermen who have their claims disputed, the number of commercial fishermen who have their claims denied, and the number of commercial fishermen who receive unemployment insurance benefits. The report required by this subparagraph shall be submitted in compliance with Section 9795 of the Government Code.
(D) This paragraph shall become inoperative on January 1, 2023, unless extended by the Legislature.
(c) (1) Subdivision (a) and the holding in Dynamex do not apply to a contract for “professional services” as defined below, and instead the determination of whether the individual is an employee or independent contractor shall be governed by Borello if the hiring entity demonstrates that all of the following factors are satisfied:
(A) The individual maintains a business location, which may include the individual’s residence, that is separate from the hiring entity.
(B) If work is performed more than six months after the effective date of this section, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession.
(C) The individual has the ability to set or negotiate their own rates for the services performed.
(D) Outside of project completion dates and reasonable business hours, the individual has the ability to set the individual’s own hours.
(E) The individual is customarily engaged in the same type of work performed under contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work.
(F) The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.
(2) For purposes of this subdivision:
(A) An “individual” includes an individual providing services through a sole proprietorship or other business entity.
(B) “Professional services” means services that meet any of the following:
(i) Marketing.
(ii) Administrator of human resources.
(iii) Travel agent services provided by either of the following: (I) a person regulated by the Attorney General under Article 2.6 (commencing with Section 17550) of Chapter 1 of Part 3 of Division 7 of the Business and Professions Code, or (II) an individual who is a seller of travel within the meaning of subdivision (a) of Section 17550.1 of the Business and Professions Code and who is exempt from the registration under subdivision (g) of Section 17550.20 of the Business and Professions Code.
(iv) Graphic design.
(v) Grant writer.
(vi) Fine artist.
(vii) Services provided by an enrolled agent who is licensed by the United States Department of the Treasury to practice before the Internal Revenue Service pursuant to Part 10 of Subtitle A of Title 31 of the Code of Federal Regulations.
(viii) Payment processing agent through an independent sales organization.
(ix) Services provided by a still photographer or photojournalist who do not provide content submissions to the putative employer more than 35 times per year. This clause is not applicable to an individual who works on motion pictures, which includes, but is not limited to, projects produced for theatrical, television, internet streaming for any device, commercial productions, broadcast news, music videos, and live shows, whether distributed live or recorded for later broadcast, regardless of the distribution platform. For purposes of this clause a “submission” is one or more items or forms of content produced by a still photographer or photojournalist that: (I) pertains to a specific event or specific subject; (II) is provided for in a contract that defines the scope of the work; and (III) is accepted by the publication or stock photography company and published or posted for sale.
(x) Services provided by a freelance writer, editor, or newspaper cartoonist who does not provide content submissions to the putative employer more than 35 times per year. Items of content produced on a recurring basis related to a general topic shall be considered separate submissions for purposes of calculating the 35 times per year. For purposes of this clause, a “submission” is one or more items or forms of content by a freelance journalist that: (I) pertains to a specific event or topic; (II) is provided for in a contract that defines the scope of the work; (III) is accepted by the publication or company and published or posted for sale.
(xi) Services provided by a licensed esthetician, licensed electrologist, licensed barber, or licensed cosmetologist. This subparagraph does not apply to a manicurist, unless the manicurist also is a licensed cosmetologist. However, the individual shall:
(I) Set their own rates and be paid directly by clients.
(II) Set their own hours of work and have sole discretion to decide the number of clients and which clients for whom they will provide services.
(III) Have their own book of business and schedules their own appointments.
(IV) Maintain their own business license for the services offered to clients.
(d) Subdivision (a) and the holding in Dynamex do not apply to the following, which are subject to the Business and Professions Code:
(1) A real estate licensee licensed by the State of California pursuant to Division 4 (commencing with Section 10000) of the Business and Professions Code, for whom the determination of employee or independent contractor status shall be governed by subdivision (b) of Section 10032 of the Business and Professions Code. If that section is not applicable, then this determination shall be governed as follows: (A) for purposes of unemployment insurance by Section 650 of the Unemployment Insurance Code; (B) for purposes of workers compensation by Section 3200 et seq.; and (C) for all other purposes in the Labor Code by Borello. The statutorily imposed duties of a responsible broker under Section 10015.1 of the Business and Professions Code are not factors to be considered under the Borello test.

(7)

(2) A repossession agency licensed pursuant to Section 7500.2 of the Business and Professions Code. Code, for whom the determination of employee or independent contractor status shall be governed by Section 7500.2 of the Business and Professions Code, if the repossession agency is free from the control and direction of the hiring person or entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(8)The relationship between a business entity and an individual performing work pursuant to contract with another business entity to provide services to the contracting business, if the contracting business entity demonstrates that all the following criteria are satisfied:

(e) Subdivision (a) and the holding in Dynamex do not apply to a bona fide business-to-business contracting relationship, as defined below, under the following conditions:
(1) If a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation (“business service provider”) contracts to provide services to another such business (“contracting business”), the determination of employee or independent contractor status of the business services provider shall be governed by Borello, if the contracting business demonstrates that all of the following criteria are satisfied:
(A) The business service provider is free from the control and direction of the contracting business entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The business service provider is providing services directly to the contracting business rather than to customers of the contracting business.
(C) The contract with the business service provider is in writing.
(D) If the work is performed in a jurisdiction that requires the business service provider to have a business license or business tax registration, the business service provider has the required business license or business tax registration.
(E) The business service provider maintains a business location that is separate from the business or work location of the contracting business.
(F) The business service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed.
(G) The business service provider actually contracts with other businesses to provide the same or similar services and maintains a clientele without restrictions from the hiring entity.
(H) The business service provider advertises and holds itself out to the public as available to provide the same or similar services.
(I) The business service provider has no other financial relationships with the contracting business.
(J) The business service provider can negotiate its own rates, provided that the rate is equal to or greater than two times the minimum wage for hours worked. rates.
(K) The business service provider can set its own hours and location of work.
(L) The business service provider is not performing the type of work for which a license from the Contractor’s State License Board is required, pursuant to Section 7000 and following Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

(c)(1)This section and the holding in Dynamex do not apply to a contract for professional service and instead the employment relationship shall be governed by the test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc., if the hiring entity demonstrates that all of the following factors are satisfied:

(A)The individual maintains a business location, which may include the individual’s residence, that is separate from the hiring entity.

(B)If work is performed more than six months after the effective date of this section, the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession.

(C)The individual has the ability to use their own employees in the completion of the work, where reasonable, and has the authority to hire and fire other persons who assist in providing the services. Nothing in this section requires an individual to hire an employee.

(D)The individual has the ability to engage in other contracts for services than with the hiring entity.

(E)Both the individual and the hiring entity have the ability to negotiate compensation for the services performed.

(F)Outside of project completion dates and reasonable business hours, the individual has the ability to set their own hours.

(G)For services that do not reasonably have to be performed at a specific location, the individual can determine where to perform the services under the contract.

(H)The individual is customarily engaged in the same type of work performed under the contract with another hiring entity or holds themselves out to other potential customers as available to perform the same type of work.

(I)The individual customarily and regularly exercises discretion and independent judgment in the performance of the services.

(2)For purposes of this subdivision:

(A)An “individual” includes an individual providing services through a sole proprietorship or other business entity.

(B)(i)“Professional services” means services that meet any of the following:

(I)Require an active license from the State of California and involve the practice of one of the following recognized professions: law, dentistry, architecture, engineering, podiatrists, veterinarian, private investigation, or accounting.

(II)Require possession of an advanced degree that customarily involves a prolonged course of specialized intellectual instruction and study in the field of marketing or the administration of human resources from an accredited university, college, or professional school, as distinguished from a general academic education.

(III)Work that is performed by a freelance writer who does not provide content to any one publication more than 25 times per year, if that person actually sets all of the following:

(ia)Hours.

(ib)Locations.

(ic)Rate of pay for work provided, except that rate shall be equal to or greater than two times the minimum wage for hours worked.

(IV)Fine artists, professional grant writers, and graphic designers if that person actually sets the hours, locations, and rates of pay for work provided.

(ii)“Professional services” does not include professionals engaged in the fields of health care and medicine.

(2) This subdivision does not apply to an individual worker, as opposed to a business entity, who performs labor or services for a contracting business.
(3) The determination of whether an individual working for a business service provider is an employee or independent contractor of the business service provider is governed by paragraph (1) of subdivision (a).
(4) This subdivision does not alter or supersede any existing rights under Section 2810.3.

(d)This section

(f) Subdivision (a) and the holding in Dynamex do not apply to the relationship between a contractor and an individual performing work pursuant to a subcontract in the construction industry, and instead the employment relationship determination of whether the individual is an employee of the contractor shall be governed by the test adopted by the California Supreme Court in the case of S. G. Borello & Sons, Inc., Section 2750.5 and by Borello, if the contractor demonstrates that all the following criteria are satisfied:

(1)The individual is free from the control and direction of the contractor in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(2)

(1) The subcontract is in writing.

(3)

(2) The subcontractor is licensed by the Contractors State License Board and the work is within the scope of that license.

(4)

(3) If the work is performed subcontractor is domiciled in a jurisdiction that requires the subcontractor to have a business license or business tax registration, the subcontractor has the required business license or business tax registration.

(5)

(4) The subcontractor maintains a business location that is separate from the business or work location of the contractor.

(6)

(5) The subcontractor has the authority to hire and to fire other persons to provide or to assist in providing the services.

(7)

(6) The subcontractor assumes financial responsibility for errors or omissions in labor or services as evidenced by insurance, legally authorized indemnity obligations, performance bonds, or warranties relating to the labor or services being provided.

(8)

(7) The subcontractor is customarily engaged in an independently established business of the same nature as that involved in the work performed.

(e)The addition of this section to the Labor Code by this act does not constitute a change in, but is declaratory of, existing law with regard to violations of the Labor Code relating to wage orders of the Industrial Welfare Commission.

(8) (A) Paragraph (2) shall not apply to a subcontractor providing construction trucking services for which a contractor’s license is not required by Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, provided that all of the following criteria are satisfied:
(i) The subcontractor is a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation.
(ii) For work performed after January 1, 2020, the subcontractor is registered with the Department of Industrial Relations as a public works contractor pursuant to Section 1725.5, regardless of whether the subcontract involves public work.
(iii) The subcontractor utilizes its own employees to perform the construction trucking services, unless the subcontractor is a sole proprietor who operates their own truck to perform the entire subcontract and holds a valid motor carrier permit issued by the Department of Motor Vehicles.
(iv) The subcontractor negotiates and contracts with, and is compensated directly by, the licensed contractor.
(B) For work performed after January 1, 2020, any business entity that provides construction trucking services to a licensed contractor utilizing more than one truck shall be deemed the employer for all drivers of those trucks.
(C) For purposes of this paragraph, “construction trucking services” mean hauling and trucking services provided in the construction industry pursuant to a contract with a licensed contractor utilizing vehicles that require a commercial driver’s license to operate or have a gross vehicle weight rating of 26,001 or more pounds.
(D) This paragraph shall only apply to work performed before January 1, 2022.
(E) Nothing in this paragraph prohibits an individual who owns their truck from working as an employee of a trucking company and utilizing that truck in the scope of that employment. An individual employee providing their own truck for use by an employer trucking company shall be reimbursed by the trucking company for the reasonable expense incurred for the use of the employee owned truck.
(g) Subdivision (a) and the holding in Dynamex do not apply to the relationship between a referral agency and a service provider, as defined below, under the following conditions:
(1) If a business entity formed as a sole proprietor, partnership, limited liability company, limited liability partnership, or corporation (“service provider”) provides services to clients through a referral agency, the determination whether the service provider is an employee of the referral agency shall be governed by Borello, if the referral agency demonstrates that all of the following criteria are satisfied:
(A) The service provider is free from the control and direction of the referral agency in connection with the performance of the work for the client, both as a matter of contract and in fact.
(B) If the work for the client is performed in a jurisdiction that requires the service provider to have a business license or business tax registration, the service provider has the required business license or business tax registration.
(C) If the work for the client requires the service provider to hold a state contractor’s license pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code, the service provider has the required contractor’s license.
(D) The service provider delivers services to the client under service provider’s name, rather than under the name of the referral agency.
(E) The service provider provides its own tools and supplies to perform the services.
(F) The service provider is customarily engaged in an independently established business of the same nature as that involved in the work performed for the client.
(G) The service provider maintains a clientele without any restrictions from the referral agency and is free to seek work elsewhere, including through a competing agency.
(H) The service provider sets its own hours and terms of work and is free to accept or reject clients and contracts.
(I) The service provider sets its own rates for services performed, without deduction by the referral agency.
(J) The service provider is not penalized in any form for rejecting clients or contracts. This subparagraph does not apply if the service provider accepts a client or contract and then fails to fulfill any of its contractual obligations.
(2) For purposes of this subdivision, the following definitions apply:
(A) “Animal services” means services related to daytime and nighttime pet care including pet boarding under Section 122380 of the Health and Safety Code.
(B) “Client” means a person or business that engages a service contractor through a referral agency.
(C) “Referral agency” is a business that connects service providers with clients that provide graphic design, event planning, minor home repair, moving, home cleaning, errands, furniture assembly, animal services, dog walking, web design, picture hanging, pool cleaning, and yard cleanup.
(D) “Referral agency contract” is the agency’s contract with clients and service contractors governing the use of its intermediary services described in subparagraph (C).
(E) “Service contractor” means a person or business who agrees to the referral agency’s contract and uses the referral agency to connect with clients.
(3) This subdivision does not apply to an individual worker, as opposed to a business entity, who performs services for a client through a referral agency. The determination whether such an individual is an employee of a referral agency is governed by subdivision (a).
(h) (1) The addition of subdivision (a) to this section of the Labor Code by this act does not constitute a change in, but is declaratory of, existing law with regard to wage orders of the Industrial Welfare Commission and violations of the Labor Code relating to wage orders.
(2) Insofar as the application of subdivisions (b), (c), (d), (e), (f), and (g) of this section would relieve an employer from liability, those subdivisions shall apply retroactively to existing claims and actions to the maximum extent permitted by law.
(3) Except as provided in paragraphs (1) and (2) of this subdivision, the provisions of this section of the Labor Code shall apply to work performed on or after January 1, 2020.

SEC. 4.Section 3351 of the Labor Code is amended to read:
3351.

“Employee” means every person in the service of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed, and includes:

(a)Aliens and minors.

(b)All elected and appointed paid public officers.

(c)All officers and members of boards of directors of quasi-public or private corporations while rendering actual service for the corporations for pay. An officer or member of a board of directors may elect to be excluded from coverage in accordance with paragraph (16), (18), or (19) of subdivision (a) of Section 3352.

(d)Except as provided in paragraph (8) of subdivision (a) of Section 3352, any person employed by the owner or occupant of a residential dwelling whose duties are incidental to the ownership, maintenance, or use of the dwelling, including the care and supervision of children, or whose duties are personal and not in the course of the trade, business, profession, or occupation of the owner or occupant.

(e)All persons incarcerated in a state penal or correctional institution while engaged in assigned work or employment as defined in paragraph (1) of subdivision (a) of Section 10021 of Title 8 of the California Code of Regulations, or engaged in work performed under contract.

(f)All working members of a partnership or limited liability company receiving wages irrespective of profits from the partnership or limited liability company. A general partner of a partnership or a managing member of a limited liability company may elect to be excluded from coverage in accordance with paragraph (17) of subdivision (a) of Section 3352.

(g)A person who holds the power to revoke a trust, with respect to shares of a private corporation held in trust or general partnership or limited liability company interests held in trust. To the extent that this person is deemed to be an employee described in subdivision (c) or (f), as applicable, the person may also elect to be excluded from coverage as described in subdivision (c) or (f), as applicable, if that person otherwise meets the criteria for exclusion, as described in Section 3352.

(h)It is the intent of the Legislature to amend the law to address workers’ compensation and the holding in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018) 4 Cal.5th 903.

SEC. 5.Section 621.5 of the Unemployment Insurance Code is amended to read:
621.5.

(a)“Employee” also means any individual who is an employee, pursuant to Section 2750.5 of the Labor Code, of a person who holds a valid state contractor’s license pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

(b) When subdivision (a) does not apply, “employee” also means any individual who is an employee, pursuant to Section 2750.5 of the Labor Code, of a person who is required to obtain a valid state contractor’s license pursuant to Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code.

(c)“Employee” also means any individual who is an employee pursuant to Section 2750.3 of the Labor Code.

SEC. 3.

 Section 3351 of the Labor Code, as amended by Section 33 of Chapter 38 of the Statutes of 2019, is amended to read:

3351.
 “Employee” means every person in the service of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed, and includes:
(a) Aliens and minors.
(b) All elected and appointed paid public officers.
(c) All officers and members of boards of directors of quasi-public or private corporations while rendering actual service for the corporations for pay. An officer or member of a board of directors may elect to be excluded from coverage in accordance with paragraph (16), (18), or (19) of subdivision (a) of Section 3352.
(d) Except as provided in paragraph (8) of subdivision (a) of Section 3352, any person employed by the owner or occupant of a residential dwelling whose duties are incidental to the ownership, maintenance, or use of the dwelling, including the care and supervision of children, or whose duties are personal and not in the course of the trade, business, profession, or occupation of the owner or occupant.
(e) All persons incarcerated in a state penal or correctional institution while engaged in assigned work or employment as defined in paragraph (1) of subdivision (a) of Section 10021 of Title 8 of the California Code of Regulations, or engaged in work performed under contract.
(f) All working members of a partnership or limited liability company receiving wages irrespective of profits from the partnership or limited liability company. A general partner of a partnership or a managing member of a limited liability company may elect to be excluded from coverage in accordance with paragraph (17) of subdivision (a) of Section 3352.
(g) A person who holds the power to revoke a trust, with respect to shares of a private corporation held in trust or general partnership or limited liability company interests held in trust. To the extent that this person is deemed to be an employee described in subdivision (c) or (f), as applicable, the person may also elect to be excluded from coverage as described in subdivision (c) or (f), as applicable, if that person otherwise meets the criteria for exclusion, as described in Section 3352.
(h) A person committed to a state hospital facility under the State Department of State Hospitals, as defined in Section 4100 of the Welfare and Institutions Code, while engaged in and assigned work in a vocation rehabilitation program, including a sheltered workshop.
(i) Beginning on July 1, 2020, any individual who is an employee pursuant to Section 2750.3. This subdivision shall not apply retroactively.

SEC. 4.

 Section 606.5 of the Unemployment Insurance Code is amended to read:

606.5.
 (a) Whether an individual or entity is the employer of specific employees shall be determined under common law rules applicable in determining the employer-employee relationship, pursuant to subdivision (b) of Section 621, except as provided in subdivisions (b) and (c).
(b) As used in this section, a “temporary services employer” and a “leasing employer” is an employing unit that contracts with clients or customers to supply workers to perform services for the client or customer and performs all of the following functions:
(1) Negotiates with clients or customers for such matters as time, place, type of work, working conditions, quality, and price of the services.
(2) Determines assignments or reassignments of workers, even though workers retain the right to refuse specific assignments.
(3) Retains the authority to assign or reassign a worker to other clients or customers when a worker is determined unacceptable by a specific client or customer.
(4) Assigns or reassigns the worker to perform services for a client or customer.
(5) Sets the rate of pay of the worker, whether or not through negotiation.
(6) Pays the worker from its own account or accounts.
(7) Retains the right to hire and terminate workers.
(c) If an individual or entity contracts to supply an employee to perform services for a customer or client, and is a leasing employer or a temporary services employer, the individual or entity is the employer of the employee who performs the services. If an individual or entity contracts to supply an employee to perform services for a client or customer and is not a leasing employer or a temporary services employer, the client or customer is the employer of the employee who performs the services. An individual or entity that contracts to supply an employee to perform services for a customer or client and pays wages to the employee for the services, but is not a leasing employer or a temporary services employer, pays the wages as the agent of the employer.
(d) In circumstances which are in essence the loan of an employee from one employer to another employer wherein direction and control of the manner and means of performing the services changes to the employer to whom the employee is loaned, the loaning employer shall continue to be the employer of the employee if the loaning employer continues to pay remuneration to the employee, whether or not reimbursed by the other employer. If the employer to whom the employee is loaned pays remuneration to the employee for the services performed, that employer shall be considered the employer for the purposes of any remuneration paid to the employee by the employer, regardless of whether the loaning employer also pays remuneration to the employee.

SEC. 5.

 Section 621 of the Unemployment Insurance Code is amended to read:

621.
 “Employee” means all of the following:
(a) Any officer of a corporation.
(b) Any individual who, under the usual common law rules applicable in determining the employer-employee relationship, providing labor or services for remuneration has the status of an employee. employee rather than an independent contractor unless the hiring entity demonstrates all of the following conditions:
(1) The individual 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.
(2) The individual performs work that is outside the usual course of the hiring entity’s business.
(3) The individual is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
(c) (1) Any individual, other than an individual who is an employee under subdivision (a) or (b), who performs services for remuneration for any employing unit if the contract of service contemplates that substantially all of those services are to be performed personally by that individual either:
(A) As an agent-driver or commission-driver engaged in distributing meat products, vegetable products, fruit products, bakery products, beverages (other than milk), or laundry or drycleaning services, for his or her their principal.
(B) As a traveling or city salesperson, other than as an agent-driver or commission-driver, engaged upon a full-time basis in the solicitation on behalf of, and the transmission to, his or her their principal (except for sideline sales activities on behalf of some other person) of orders from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments for merchandise for resale or supplies for use in their business operations.
(C) As a home worker performing work, according to specifications furnished by the person for whom the services are performed, on materials or goods furnished by that person that are required to be returned to that person or a person designated by him or her. designee thereof.
(2) An individual shall not be included in the term “employee” under the provisions of this subdivision if that individual has a substantial investment in facilities used in connection with the performance of those services, other than in facilities for transportation, or if the services are in the nature of a single transaction not part of a continuing relationship with the employing unit for whom the services are performed.
(d) Any individual who is an employee pursuant to Section 601.5 or 686.
(e) Any individual whose services are in subject employment pursuant to an election for coverage under any provision of Article 4 (commencing with Section 701) of this chapter.
(f) Any member of a limited liability company that is treated as a corporation for federal income tax purposes.

SEC. 6.

 No provision of this measure shall permit an employer to reclassify an individual who was an employee on January 1, 2019, to an independent contractor due to this measure’s enactment.

SEC. 6.SEC. 7.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.