SACRAMENTO, Calif. – Last year, the California Supreme Court issued a decision in the case Dynamex Operations West, Inc. v. Superior Court of Los Angeles which upheld a lower court’s “ABC Test” that determines whether a worker is an “independent contractor” or an “employee.”
Following the decision, the California legislature got to work codifying the court’s decision into statutory law – and establishing exemptions to it that the legislature deemed necessary for certain types of businesses.
Last week, the California Assembly passed bill AB 5, which adopts the court’s reasoning in the Dynamex case, which essentially holds that all workers are employees by default and should only qualify as independent contractors if the conditions of the ABC Test are met.
In its ruling, the California Supreme Court held that under the ABC Test, “a worker is properly considered an independent contractor to whom a wage order does not apply only if the hiring entity establishes: (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”
By its plain text, the ABC Test appears to cover a wide variety of businesses in which workers have long been considered independent contractors, but many of whose workers would likely ‘fail’ the test – including adult performers, who generally have not been considered “employees” of the studios who produce the works in which they appear.
In addition to codifying in statutory law the ABC Test, AB 5 serves to exempt a list of business types from the test.
“The bill would exempt specified professions from these provisions and instead provide that the employment relationship test for those professions shall be governed by the test adopted in S. G. Borello & Sons, Inc. v. Department of Industrial Relations if certain requirements are met,” states the Legislative Counsel’s Digest for AB 5. “These exempt professions would include licensed insurance agents, certain licensed health care professionals, registered securities broker-dealers or investment advisers, a direct sales salesperson, real estate licensees, workers providing hairstyling or barbering services, and those performing work under a contract for professional services.”
In a statement issued after the Assembly’s vote last week, Assemblywoman Lorena Gonzalez (D-San Diego), the bill’s author, called AB 5 “an important work-in-progress to provide certainty to California’s businesses.”
Adult studios are among those awaiting such certainty – but they may well be disappointed when the bill’s text is finalized. In a recent post on the Ogletree Deakins website, attorney Karen Tynan noted that “trade organizations and professional groups continue to lobby in Sacramento to join the list of exemptions to the ABC test, but it is unclear which categories of workers might be added to the growing list of professionals.”
If adult performers are not listed among the professionals exempt from the ABC Test, the plain text of the test strongly suggests performers would be considered employees rather than independent contractors. Among other things, a performer who is hired by an adult studio or producer to appear in an adult movie seems very unlikely to be deemed to be doing something “outside the usual course of the hiring entity’s business.”
While it might be comforting to assume this challenge is one which can be dealt with careful drafting of contracts, there have been cases in other states where the courts made it clear that when it comes to the question of whether a worker is an employee or independent contractor, the law prevails over the terms of a contract.
In other words, unless AB 5 is amended to add adult performers to the list of exempted professionals, adult studios may find themselves literally following the advice of a recent tweet from Tynan: “Read it and weep.”
https://twitter.com/KarenAttorney/status/1135945829661851648
