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Moore: Prop. 22's Nationwide Effect on the Workers' Comp Debate: [2020-11-09]
California's Proposition 22 was overwhelmingly given a thumbs up by the Golden State’s voters.
If you are saying, yes, but I do not live in California, check out the last heading in this blog post. It's worth your time.
For many years, California had moved toward defining independent contractors as employees. California Assembly Bill 5 was passed in 2019. The effects on the independent contractor versus employee debate were chilling. The Dynamex Supreme Court decision was the basis for AB 5.
AB 5 enumerated each industry where the workers should be considered employees. The Dynamex decision was very vague as to the exact companies that should not allow the independent contractor classifications.
From truckers to independent press contractors, AB 5 changed the rules of having independent contractors working for your firm.
For instance, many independent writers of workers' comp articles seemed to disappear overnight. Due to privacy, I will not mention them by name.
When I traveled to what I thought was going to be an all-day Workers' Compensation Insurance Rating Bureau conference earlier this year, I even asked the question to the presenter after discussing the class code changes involved with AB 5.
There are at least three Assembly Bills pending that contradict AB 5. What effect will that have on how the WCIRB views any class code changes or premium audits that involve independent contractors? The WCIRB told me that it would have to get back to me. Fair enough.
The beginning of AB 5: Dynamex decision
The Dynamex decision provided the three tests to see if a California worker is an employee or an independent contractor. The worker is:
After the Dynamex decision, many employers contacted me on premium audit and policy confusion. Their basic question was, "How do we tell if the workers working for us are contractors or employees?"
What Prop. 22 does not do
Prop. 22 does not define any other employees/contractors beyond independent drivers such as Uber, Lyft and Doordash.
Earlier, I mentioned reporters and other types of workers. They are still under AB 5/Dynamex. Prop. 22 covered a very defined section of independent contractors.
More workers may be added to the independent contractor list in the future.
What Prop. 22 means for companies outside California
One of my catchphrases is, "What happens in California will be coming to a state near you." The Golden State always seems to make rules and regulations that are often adopted by other states in some form. Massachusetts and Tennessee even used some of AB 5’s wording in introduced legislation.
Bottom line: Make sure your independent contractor language spells out everything in great detail. Do not use a boilerplate contract. A different version of AB 5 or Prop. 22 may show up in your state. Be prepared.
This blog post is provided by James Moore, AIC, MBA, ChFC, ARM and is republished with permission from J&L Risk Management Consultants. Visit the full website at www.cutcompcosts.com.