On the last day of the two-year legislative session, Monday, August 31, 2020, the California legislature passed several sweeping pieces of legislation, which Governor Newsom is expected to sign within the next month. Although this is part of California’s legislative push to protect essential workers impacted by the pandemic, the bills have far-reaching implications beyond worker safety, including SB 1383 (expanding the provisions of California’s Family Rights Act) and AB 2257 (revising AB 5 regarding worker misclassification).
SB 1383: Expanded Family Medical Leave
SB 1383 provides for a significant expansion of California’s unpaid leave laws by lowering the threshold for coverage of the California Family Rights Act from employers with 50 employees to those with five employees. Labor market data suggests the proposal will extend unpaid leave eligibility to millions of employees working for an estimated 175,000 or more employers, that will be required to provide up to 12 workweeks of unpaid leave to eligible employees (those with 12 months of service with the employer who have at least 1,250 hours of service with the employer during the previous 12-month period). The leave is to be available for employees to bond with a new child or to care for themselves or a child, parent, grandparent, grandchild, sibling, spouse or domestic partner. Leave is also to be available due to a qualifying exigency related to the covered active duty or call to covered active duty of an employee’s spouse, domestic partner, child or parent in the Armed Forces of the United States.
AB 2257: Worker Classification: Employee or Contractor?
Last year California enacted AB 5, which created a presumption that workers are employees (and therefore not independent contractors) unless the employer can affirmatively prove three things (sometimes referred to as the “ABC test”): (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed. AB 5 included a host of exceptions, many of which have been highly controversial. To view Manatt’s on-demand webinar about AB 5, click here.
AB 2257 revises and recasts the provisions of AB 5 by adding 12 new provisions to the Labor Code, Sections 2775-2787. These changes exempt approximately 35 new professions from the ABC test and remove or modify requirements that existed for many of the previous exemptions under AB 5.
Non-legislative changes to AB 5’s scope may also be coming. Proposition 22, a November ballot initiative, would redefine app-based drivers as independent contractors, and not employees, of the rideshare company they are working with, if certain requirements are met.
New Exemptions
1. Music Industry Exemptions. In a major victory for the music industry, AB 2257 exempts recording artists; songwriters; lyricists; composers; proofers; record producers and directors; managers for recording artists; musical engineers and mixers engaged in the creation of sound recordings; musicians engaged in the creation of sound recordings; vocalists; photographers working on recording photo shoots, album covers, and other press and publicity materials; and NS independent radio promoters from the coverage of AB 5. Additionally, there is a catchall exemption for others engaged to render any creative, production, marketing or independent music publicist services related primarily to the creation, marketing, promotion or distribution of sound recordings or musical compositions. The exemptions exclude non-music publicists and film and television crews. Each of these has its own set of criteria that must be satisfied, in addition to the basic requirements under the older 11-factor Borello test. The bill also provides exemptions for single-engagement musical or musical group live performances, provided that certain criteria are met, as well as individual performance artists, including but not limited to those who perform comedy, improvisation, stage magic, illusion, mime, spoken word, storytelling or puppetry. The latter excludes theatrical productions.
2. Professional Services Exemption. Under the professional services exemption, AB 5 now adds the following: photo editors and videographers; digital content aggregators; copy editors; illustrators; content contributors, advisors, producers, narrators or cartographers for journals, books, periodicals, evaluations, or other publications or educational, academic or instructional work in any format or media; specialized performers hired to teach a master class for no more than one week; services provided by licensed real estate appraisers; and professional foresters.
3. Broad Range of Other Exemptions. The bill provides exemptions for certain other professions, including a person who provides (a) underwriting inspections; (b) premium audits; (c) risk management; or (d) loss control work for the insurance and financial services industries; (e) landscape architects; (f) manufactured housing salespersons; (g) persons engaged by an international exchange visitor program; and (h) competition judges.
Provisions With Modified Requirements
1. Business Service Provider Exemption. The bill adds requirements for a valid business service provider contractor arrangement, including that it must specify the payment amount, including any applicable rate of pay, for services to be performed, as well as the due date of payment for such services. It also clarifies that (a) the contracting business may provide tools that are “consistent with the nature of the work” and (b) the business address for the service provider may include the service provider’s home residence.
2. Referral Agency Exemption. The bill modifies several of the requirements for a valid service provider relationship with a referral agency, including obtaining certifications from the service providers that they have the appropriate licenses, permits or certifications necessary for their profession and business, which certifications must be retained for a period of three years. The exception expands the definition of “tutor” and adds youth sports coaching and language interpreting services to the list of services that a service provider may provide. Notably, this revision removes and excludes certain categories of workers including those in high-hazard industry jobs, as well as janitorial, delivery, courier, transportation, trucking, agricultural labor, retail, logging, in-home care or construction services other than minor home repair.
Why it Matters
Employers and those continuing to use independent contractors should revisit their worker relationship or contractor agreements to account for any revised requirements in the new law, as well as to revise handbooks and other policies in light of the foregoing developments, such as the significant expansion of protected family leave. Manatt will continue to monitor developments in these areas of the law.