Legislative Update: AB 2257 is now California law – now what?
Eight months after the enactment of AB 5, California’s Employee Classification law, employers are once again having to re-evaluate the status of their California employees. Earlier this month, California’s Governor signed AB 2257 into law, which carves out additional exceptions for industry freelancers.
Background on AB 5 & AB 2257
AB 5, or the “gig workers bill,” codified the California state Supreme Court’s 2018 Dynamex decision, adopting the ABC test for classifying workers in the state. That court decision only applied to wage order claims; however, AB 5 expanded the Dynamex application to nearly all areas of worker classifications within the state. See our previous blog post on AB 5 here.
Almost immediately after AB 5 was signed into law, industry giants (like Uber and Lyft) challenged the law’s validity. Many employers scrambled to determine just how much their independent contractors’ relationship would affect their businesses’ compliance with the new law. Eight months into AB 5’s enactment, enter AB 2257.
What is the effect of AB2257?
As a result of massive lobbying efforts, the new classification law now expands the freelancers that fall under the AB 5 exemption – leaving the rest of the law largely unchanged.
For the games industry, the most notable of the new exemptions are contractors who provide the following types of services:
- Recording arts;
- Copy editing and illustrating; and
- Digital content and feedback aggregation.
The law defines a “digital content aggregator” as a “licensing intermediary” who obtains a license from a photographer, videographer, photojournalist, or photo editor for the purpose of distributing that license to third-party end-users.
The law defines “data aggregator” as a business or organization that “requests and gathers feedback on user interface, products, services, people, concepts, ideas, offerings, or experiences from individuals willing to provide it.” This would seem to exempt third-party data analysts from the ABC test, an area with an especially complex web of state regulations–see our posts on the CCPA here.
What does it mean to be exempt from the ABC test?
If exempt from the ABC test under AB 2257, employers must still comply with the old, multi-factored classification test (the Borello test) in an employer’s relationships with their independent contractors.
What’s an employer with California employees to do?
Structuring independent contractor relationships to adhere to either the ABC test or the Borello test is the key way to ensure a business is complying with California employment law.
That being said, some industries just can’t get around the re-classification of these old independent contractors as new employees. If that’s the case, see our two-part blog post on “What California employers need to know about newly classified employees” here.
Does AB 2257 change AB 5’s B2B exemption?
No. AB 2257 left those exemptions unchanged by only adding a few new types of contractors eligible for that exemption list (i.e. wedding planners). The B2B exemption will be the topic of another blog post.