May 24, 2019
By: Thomas M. O’Connell
Executive Summary
The California Assembly has amended AB5 significantly and added several industry carve outs to the Dynamex “ABC” test, but it did not make any changes that directly relate to the franchise industry.
Analysis
On May 24, 2019, the California Assembly amended AB5 significantly, carving out more industries and professions from the Dynamex “ABC” test and stating explicitly that the Borello test–either as is or slightly modified by the bill–would control those industries. Specifically, the bill now includes the following professions that are exempt in some way from the “ABC” test:
(1) A person or organization who is licensed by the Department of Insurance …
(2) A physician and surgeon licensed by the State of California … performing professional or medical services provided to or by a health care entity …
(3) A securities broker-dealer or investment adviser or their agents and representatives that are registered with the Securities and Exchange Commission or the Financial Industry Regulatory Authority or licensed by the State of California …
(4) A direct sales salesperson …
(5) A real estate licensee …
(6) (A) A worker providing hairstyling or barbering services who has a booth rental permit and is free from direction or control both under the contract for the performance of the work and in fact …
(c) (1) … a contract for professional service
Looking Forward
While AB5 feels like an attack on many employers, there is a bright side to what occurred on the Assembly Floor yesterday. Although these changes may be contrary to the original drafters intent, these changes demonstrate that the “ABC” test is plainly not appropriate for everyone. While many, many more industries should be covered by these carve outs and considered under the Borello test, this is both a good start in the process and anecdotal evidence of the unsettled nature of this complicated legal question.
However, on the not-so-bright side, an opportunity for our hairstyling and barber services franchisors and franchisees was just barely missed in this amendment. For those industries, it is strongly recommended that franchisors and franchisees look at the new criteria that the assembly has identified as demonstrating “free from direction or control” and consider whether they can take any actions to incorporate this in their employment practices.
This article was originally published on the California Franchise Network.
