Does AB 5 apply to public-sector employers? Lawmakers aren't finished

California Assembly Bill (AB) 5, which Governor Gavin Newsom signed in late 2019, codified into law the landmark California Supreme Court ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which created a presumption that a worker who performs services for a private company is an employee for purposes of wage and benefits claims arising under the Wage Orders issued by the Industrial Welfare Commission (IWC). The question now is whether AB 5 applies to public-sector employees. Let the debate begin.

How we got here

Under Dynamex, an employer must satisfy a three-part test—commonly known as the "ABC" test—to establish a worker is an independent contractor under the Wage Orders. Because the case was decided under IWC Wage Orders that generally don't apply to public agencies, it's generally accepted that (1) Dynamex had no application to the public sector and (2) the well-established common-law "control" test continued to apply in the public sector.

In September 2019, the California Legislature passed AB 5, which codified the test announced in Dynamex for purposes of the Wage Orders but also extended the test to benefits and wages arising under the California Labor Code and the Unemployment Insurance Code. AB 5 added Section 2750.3 to the Labor Code, which provides, in part: