SB 1423

Bill Subjects

Abstract

Existing law requires a 3-part test, commonly known as the "ABC" test, to determine if workers are employees or independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission. Under the ABC test, a person providing labor or services for remuneration is 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. Existing law charges the Labor Commissioner with the enforcement of labor laws, including worker classification. Existing law exempts specified occupations and business relationships from the application of the ABC test described above. Existing law, instead, provides that these exempt relationships are governed by the multifactor test previously established in the case of S.G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341. This bill would establish an alternative test for determining whether an individual having a contractual relationship with a contracting entity or through a platform is an employee or an independent contractor. The bill would provide that an individual or sole proprietor providing labor or services for remuneration who meets specified conditions shall be considered an independent contractor rather than an employee with respect to the individual's relationship with a contracting entity or platform. These conditions would include, among others, that the services to be provided by the individual be set forth in a written contract of limited duration, that the individual sets their own schedule and can decline any offer for remuneration from a contracting entity or through a platform without penalty, that the equivalent hourly rate paid to the independent contractor meet or exceed the applicable minimum wage, and that the contract must address meal and rest breaks if it requires the independent contractor to work multiple consecutive hours and must include a premium rate of pay for any hours in excess of 8 that the contract requires the individual to work in a day. The bill would specify that this provision does not preclude a contract from limiting the number of hours that an independent contractor can perform work under the contract in a single day. The bill would require the independent contractor to be covered by a policy for occupational accidents that insures the independent contractor for medical expenses and lost income resulting from injuries suffered while the independent contractor is performing services, in accordance with specified policy requirements, including medical coverage in excess of the independent contractor's own medical insurance, death and survivor payments, and disability payments. The bill would also provide that independent contractors who satisfy the conditions of the bill are eligible for state disability insurance and paid family leave benefits offered through the Employment Development Department and State Disability Insurance Program. The bill would require the contracting entity or platform to maintain a policy against the discrimination against an independent contractor on the basis of race, color, ancestry, and various other protected classes recognized under existing law. The bill would specify that as of April 1, 2021, the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission do not apply to the independent contractor relationships under the bill's provisions, except as expressly set forth in the bill. The bill would also specify that the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission do not apply to work performed on or before March 31, 2021, provided that the then-effective contract between a contracting entity or a platform and an individual substantially complied with specified provisions of the bill or the equivalent hourly rate earned by an individual or sole proprietor met or exceeded the then-applicable minimum wage for the time necessary to complete the service, excluding commute time. The bill would also define various terms.