You may have heard of AB5, but you may not know what it is or how it affects you. AB5 is a bill that was passed in California in 2019 that reclassifies many workers as employees instead of contractors.
What is AB5?
AB5 is a California law that makes it harder for companies to classify workers as independent contractors. which went into effect on January 1, 2020, could have a major impact.
Under AB5, workers will be considered employees if they perform work that is within the usual course of the company’s business. This means that companies that rely on independent contractors to provide services, may have to reclassify their contractors as employees.
AB5 is expected to raise labor costs for businesses in California, as well as reduce the number of gig economy opportunities available. It remains to be seen how exactly the law will play out in the real world, but it could have far-reaching implications.
How will AB5 impact workers’ compensation?
The new law could have a big impact on workers’ compensation in California. For one thing, it will make it harder for companies to classify workers as independent contractors. That means that more workers will become employees, and therefore eligible for workers’ compensation benefits in case of injury.
This could lead to an increase in worker’s compensation claims, and premiums paid by employers. It could also lead to more litigation. Companies will try to fight back against what they see as unfair classification of their workers. In the end, though, it is likely to provide better protection for workers who are injured on the job.
What does AB5 do?
The passage of AB5, which took effect on January 1, 2020, codifies and expands upon the Supreme Court’s Dynamex decision from 2018. The law makes it more difficult for companies to classify workers as independent contractors rather than employees. This is significant because employees have a right to a host of protections and benefits that independent contractors do not. These include; minimum wage, overtime pay, paid sick days, and unemployment insurance.
AB5 codifies the “ABC” test first established in the Dynamex decision. Under this test, a worker is classified as an employee unless all three of the following conditions are met:
Firstly, the worker is free from the control and direction of the hirer in connection with the performance of the work. Secondly, the worker performs work that is outside the usual course of the hirer’s business. And lastly, the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
The first two prongs of this test are relatively straightforward. The third prong poses more difficulty because it requires a worker to be engaged in an independently established trade or business – something that many workers who provide services through platforms like Uber or Lyft cannot say they do. As a result of this requirement, many workers who had been classified as independent contractors prior to AB5 will now be classified as employees under California law.
How will AB5 affect businesses?
The new law will likely have a significant impact on how businesses classify their workers. In the past, many companies have misclassified their employees as independent contractors in order to avoid paying certain taxes and benefits. However, under AB5, businesses will no longer be able to do this. They will have to accurately classify their workers as either employees or independent contractors. This could result in higher costs for businesses, as they will now be responsible for paying taxes and benefits for their employees. Additionally, the law may also lead to increased litigation from workers who believe they have been misclassified.
What are the pros and cons of AB5?
There are a few pros and cons to AB5 that workers should be aware of before the bill goes into effect.
pros:
-Firstly, the bill can potentially lead to more workers being classified as employees rather than independent contractors. This would provide these workers with more protections and benefits, such as minimum wage and overtime pay, access to unemployment and workers’ compensation, and paid sick leave.
-Secondly, AB5 could help level the playing field for companies that compete against businesses that use independent contractors.
-Lastly, the bill may also help reduce worker misclassification in California, which has been a problem for many years.
cons:
-AB5 could make it harder for some people to work as independent contractors, especially if they rely on this work to supplement their income or need flexible schedules.
-Also, the bill could also lead to job losses in certain industries that rely heavily on independent contractors.
Pascal Burke – help,s contractors assess their risks and choose the policy which covers the liabilities of the business and workers most proactively.
Conclusion
The AB5 workers’ compensation law is a great way to protect workers in California. That is to say, by providing benefits and coverage for injuries, illnesses, and death, this law ensures that workers are taken care of if something happens to them on the job. If you’re a worker in California, make sure you know your rights under this law so that you can get the compensation you deserve if something happens to you while working.
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