AB5 Updates

After Prop 22 passed in November, not much remains of Assembly Bill 5.

Enacted in January, 2020, AB5 was California’s attempt to regulate the rising gig economy and create a level playing field for workers. It required employers to reclassify gig workers as employees and provide them with minimum wage, health benefits, and other protections.

However, the law was met with sharp resistance.

Uber, Lyft, and other companies that depend on gig workers said AB5 would damage their business and hurt workers as well as consumers. In response, they authored Prop 22, which provides baseline benefits and exempts the companies from reclassifying drivers. In November, backed by the state’s most expensive marketing campaign in history, Prop 22 passed. 

For both gig workers and companies, keeping up with AB5 updates is paramount to staying compliant and ensuring businesses run smoothly. To make this easier, we’ve prepared this post on the AB5 updates you should know today. 

This article is part of our guide on Assembly Bill 5 (AB5).

AB5 updates: Here’s what you need to know now

Like most things in 2020, AB5 didn’t roll out as planned. Here’s how the law has changed since it was passed.

A new version of AB5 expands exemptions

On September 4, two months before Californians voted on Prop 22, Governor Gavin Newsom signed an updated version of AB5 into law. 

The new legislation, called AB 2257, doesn’t significantly change AB5 aside from allowing more freelancers to be exempt from the ABC test.

Under AB 2257, recording artists, performing artists, landscape architects, translators, copy editors and illustrators, real estate appraisers, home inspectors, and several other categories of freelancers can retain their status as freelancers. 

Some AB5 updates create more confusion than they resolve

Although more exemptions from the ABC test will be viewed favorably among many workers and companies, some AB5 updates have introduced more confusion.

For example, the changes regarding which industries are exempt and how to fulfill the requirements for exemption remain unclear. According to Professor Edward Zelinsky of Cardozo Law School, ambiguous language in the bill could lead to years of litigation to determine how it should be interpreted.

“AB5 [now AB 2257] does not make the law of employee status clearer, simpler or more uniform,” he stated. “Indeed, [it] makes the law more complex and less uniform than it was before.”

Can Prop 22 and AB5 coexist?

The answer is yes… kind of. 

Although AB5 (technically renumbered as AB 2257) will live on, the companies it was aimed at are no longer compelled to comply with its primary provision. 

Following the passage of Prop 22, rideshare drivers and delivery service providers that work for Uber, Lyft, Doordash, and other Delivery Network Company companies can remain as independent contractors instead of employees. 

By exempting these companies categorically, Prop 22 essentially guts AB5 of its original intent. 

Meanwhile, freelancers who perform other types of work will be reclassified unless they meet the requirements for exemption under AB 2257.

Lawsuits against Uber and Lyft are not going away

In May, the state of California sued Uber and Lyft for refusing to comply with AB5 after it was enacted in January. Despite a court order to reclassify drivers, the companies continued treating drivers as independent contractors and threatened to shut down operations in California.

According to The New York Times, the pending lawsuit against Uber and Lyft for not complying with AB5 will be upheld, although Prop 22 “will drastically reduce its scope.”

California is seeking penalties for noncompliance for the time between the passage of AB5 and the passage of Prop 22.

At the same time, Uber is facing a separate lawsuit that alleges it illegally coerced drivers into voting for Prop 22. According to reporting by TechCrunch, two Uber drivers and two California nonprofits — Worksafe and Chinese Progressive Association — filed the lawsuit.

Stay tuned for more AB5 updates

Prop 22 is a hallmark legislation, but it’s not the end of the story. AB5 hasn’t been extinguished, and it could even be revived on a larger scale, depending on what incoming President Joe Biden and Vice President Kamala Harris can accomplish in Congress. 

According to his campaign website, President-Elect Biden will take an aggressive stance against employee misclassification. He also plans to establish federal regulations for the gig economy to ensure workers get fair legal protections and rights, based largely on California’s AB5 law.

“As president, Biden will work with Congress to establish a federal standard modeled on the ABC test for all labor, employment, and tax laws,” his website states. 

So far, a lot has changed, and only time will tell what’s coming in the future.

For all upcoming AB5 updates, Stoke is in your corner.