United States: How Much Will AB 5 Really Change California Law?

Last Updated: September 20 2019
Article by Aaron H. Cole

The answer is not as much as you may think. Much of the recent media coverage of California's Assembly Bill 5 (AB 5) suggests that the bill represents a sea change in California law with respect to the classification of independent contractors.

Not quite.

Pre-AB 5: The ABC Test Has Been California's Test Since April 2018

The real sea change occurred over a year ago in April 2018, when in a significant decision the Supreme Court of California changed the state's legal test for determining whether a worker is properly classified as independent contractor rather than employee. The court replaced the Borello test, which had been in effect since 1989, with the ABC test, which the court borrowed (like a cup of sugar) from the state of Massachusetts. But the short story is that the ABC test will likely make it significantly more difficult for a worker to qualify as an independent contractor.

AB 5, if signed by Governor Gavin Newsom, will add the ABC test to the California Labor Code. But the ABC test has been the legal test in California since April 2018.

So, how might AB 5 change the legal landscape in California with respect to classifying workers as independent contractors?

AB 5 Significantly Reduces the Number of Workers Subject to the ABC Test

First, the most significant (and underreported) change under AB 5 will be to significantly reduce the number and types of workers who would otherwise be subject to the ABC test under the Supreme Court of California's 2018 decision.

As previously discussed, AB 5 exempts a long list of occupations and types of service providers from the ABC test. The old Borello test will continue to apply to these exempted workers. Without the exemptions provided by AB 5, the new test established by the Supreme Court of California would apply to every independent contractor in California, from barbers to doctors to investment advisers to manicurists.

AB 5 Expands the Claims Subject to the ABC Test

Second, AB 5 will expand the types of legal claims to which the ABC test will be applicable.

California's employers must comply with both the Labor Code and Industrial Welfare Commission's wage orders, which govern the wages, hours, and working conditions in certain industries or occupations.

On its face, the holding in the Supreme Court of California's 2018 decision limited the ABC test to claims under California's wage orders. For example, under the court's decision, the ABC test would apply to claims under the wage orders for overtime pay as well as meal and rest period premium pay by a worker who alleges misclassification as an independent contractor.

Business Expense and Waiting Time Claims

Under AB 5, the ABC test would also apply to certain claims that can only be made under the Labor Code, such as claims for reimbursement of business expenses or for waiting time penalties. Under AB 5, the ABC test would also apply to a claim for unreimbursed business expenses under the Labor Code by a worker who alleges misclassification as an independent contractor.

PAGA Claims

The most significant effect of this expansion of the test to Labor Code claims is that, under AB 5, the ABC test will apply to claims for civil penalties under the Labor Code Private Attorneys General Act (PAGA) for violations of the Labor Code and wage orders. PAGA suits represent a significant risk of exposure for California employers because they are mass litigation matters, like class actions. But, unlike class actions, PAGA actions cannot be compelled to arbitration—and the civil penalties that theoretically can be recovered under PAGA add up quickly to six and seven figures.

Pre-AB 5 Expansion of the ABC Test

However, it may be easy to overstate the significance of AB 5's expansion of the ABC test. In fact, the expansion appears to have already been underway for over a year. Just a few months after the Supreme Court of California's April 2018 decision, the Orange County Superior Court held that the ABC test applied to PAGA actions. And, in May 2019, the California Labor Commissioner's Office announced that, as a matter of enforcement policy, it would treat California Labor Code provisions that overlap with requirements under the wage orders as subject to the ABC test. This would include Labor Code claims for inaccurate wage statements, meal and rest periods, overtime, minimum wage, liquidated damages, and reimbursement of expenses.

AB 5 Authorizes Actions for Injunctive Relief by State and Local Governments

Third, AB 5 will allow the attorney general and certain city attorneys to bring civil actions for injunctive relief.

This last-minute addition to the bill on September 6, 2019, introduced some very confusing language. But on its face, this new provision appears to give the attorney general (and some city attorneys) the right to bring lawsuits seeking orders compelling the reclassification of independent contractors as employees. These government plaintiffs would have to litigate the issue of whether the workers were properly classified, just as a private individual bringing a lawsuit would do under the new ABC test. Thus, this provision might be seen as just adding another potential litigant to the list of potential plaintiffs.

However, this provision may pose a greater risk to enterprises targeted by the government than the addition of a potential plaintiff. As is regularly demonstrated, a private litigant will settle misclassification lawsuits without requiring reclassification of workers, but the government litigant, which is not responsive to the same incentives as a private litigant, may not.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions