On Sept. 18, California Gov. Gavin Newsom signed Assembly Bill 5 (AB5) into law. AB5, effective Jan. 1, 2020, seeks to codify and clarify a California Supreme Court case (Dynamex Operations West, Inc. v. Superior Court of Los Angeles), which dramatically changed the standard for determining whether workers in California should be classified as employees or as independent contractors. Specifically, the Dynamex court held there is a presumption that workers are employees, and placed the burden on an entity classifying an individual as an independent contractor to prove that such a classification is proper under a three-part “ABC” test.

Although much of the public debate surrounding AB5 has centered around the “gig economy” (such as ridesharing companies), whether AB5 impacts more traditional business relationships, such as franchisee-franchisor relationships, remains up for debate.

Click here to read the full GT Alert, “AB5 Update: California Legislature Seeks Shake-Up of Gig Economy; Any Impact of CA Independent Contractor Laws on Franchisors Remains Unclear.”