SACRAMENTO, Calif. — California lawmakers rewrote the rules of employment across a wide swath of industries Wednesday in legislation that could grant hundreds of thousands of workers new job benefits and pay guarantees.
After vigorous debates over what occupations should be exempted, Assembly Bill 5, which curbs businesses’ use of independent contractors, gained final approval in the state Senate and the Assembly and was sent to Gov. Gavin Newsom.
The 6,700-word bill is one of the most controversial of the year. It could upend the relationship between workers and bosses across businesses as varied as ride-hailing tech giants, construction, health care, trucking, janitorial services, nail salons, adult entertainment, commercial fishing and newspapers.
The message of the legislation, said its author, Democratic Assemblywoman Lorena Gonzalez of San Diego, is “we will not in good conscience allow free-riding businesses to continue to pass their own business costs on to taxpayers and workers. It’s our job to look out for working men and women, not Wall Street and their get-rich-quick IPOs.”
Contractors, including many in multibillion-dollar technology companies, are not covered by laws guaranteeing a minimum wage, overtime pay, sick leave, family leave, unemployment and disability insurance, workers’ compensation and protection against discrimination or sexual harassment. Nor do businesses pay into Social Security or Medicare for contractors.
After months of lobbying, AB 5 exempted a host of occupations — but not platform-based gig giants Uber, Lyft, DoorDash, Postmates and others that mounted a powerful push to avoid reclassifying their workers as employees with labor law protections.
AB 5 codifies and expands on a 2018 California Supreme Court decision that adopted a strict, three-part standard for determining whether workers should be treated as employees, modeled on a Massachusetts test. Without the bill, the court decision would have affected a far broader share of the economy.
California is likely to set a precedent for others and could offer impetus for similar legislation now pending in Congress.
However, enforcing the law against multibillion-dollar app-based technology behemoths, with a California workforce estimated at some 400,000 full- and part-timers, could involve protracted battles.
Businesses say the extra benefits add as much as 30% to their labor costs.
But AB 5 is narrower than the court decision due to the scores of occupations it exempts from the new test. Exempted workers include doctors, dentists, lawyers, engineers, accountants, architects, Realtors, travel agents, graphic designers, human resources administrators, grant writers, marketers, fine artists, investment advisers and broker-dealers.
The exemptions raised objections even among the bill’s opponents. The carve-outs favored “the trade groups with the best lobbyists,” said Republican Assemblywoman Marie Waldron of Escondido.