California Business Groups Willing To Back ‘Dynamex’ Bill — In Exchange For Exemptions

A coalition of influential California business groups says it will support a bill that would codify a California Supreme Court decision that placed strict limits on classifying workers as independent contractors — if the legislation includes additional exemptions for certain professions.

“We respectfully SUPPORT if AB 5 is further AMENDED to provide a more progressive and holistic approach that fit today’s modern workforce,” the coalition stated in letters to the bill’s author and the Assembly Labor committee submitted Monday afternoon.

The letters — signed by California Chamber of Commerce, California Retailers Association and California Building Industry Association, among others — ask for broader exemptions for professionals beyond those already agreed to for doctors and insurance agents.

The coalition also seeks a broader exemption for workers “who prefer to control their own schedule,” including consultants, travel agents, and truck, taxi and “gig economy” drivers; and exempting short-term projects and business-to-business contracts.

The groups’ new position drew cautious praise from the bill’s author and supporters.

“It’s a step forward,” said the bill’s author, Asm. Lorena Gonzalez (D-San Diego). “I’m glad they’re not opposing it.”

But Gonzalez called the proposed amendments “too broad.”

“They can’t actually think I would agree to those things,” she said, adding that she will continue “to work industry-by-industry to find appropriate situations” for additional amendments and exemptions.

Gonzalez named hairdressers and real estate agents as industries she’s open to including and added that she is “interested but not sold on short-term projects.”

“The law of unintended consequences is very real,” she said. “We don’t want to start making exemptions that undercut a large portion of workers who are protected today.”

The California Supreme Court issued the ruling — commonly referred to as the “Dynamex decision” — a year ago. It stemmed from a case brought by delivery drivers who believed the company Dynamex misclassified them as independent contractors instead of employees.

The ruling laid out three criteria — known as the “ABC” test — that must be met for an employer to classify a worker as an independent contractor. A key part of the test states a worker can only be considered an independent contractor if he or she “performs work that is outside the usual course of the hiring entity’s business.”

Workers across a range of industries — from trucking to hair styling — would likely have to be reclassified as employees instead of independent contractors. Business and industry groups have argued the decision would be disruptive and costly.

Labor groups, meanwhile, hailed the decision as a victory that would extend benefits and protections to more workers. Classifying workers as employees requires employers to pay for unemployment insurance, family leave and workers’ compensation, among other benefits and protections.

The California Labor Federation, a key supporter of the bill, says the letter shows “we’re making progress” in negotiations and says some of its proposed amendments are “reasonable points of discussion.”

“But I would also caution that there’s no desire from our end to do anything that substantially weakens the Dynamex decision itself,” says the Labor Fed’s Steve Smith. “We know that this is an incredibly complicated issue, and so that’s why we’ve been so willing to engage in discussions.”

The “support-if-amended” position demonstrates the tightrope the Chamber and business groups must walk in the Dynamex debate.

Absent a new law, the state Supreme Court ruling would apply to all industries, which is what’s driving business groups to the negotiating table.

Yet in the letters, they argue the current version of the bill would “not only (hurt) the business model of a broad swath of industries and billions of venture capital dollars that are increasingly invested in businesses, but also (hinder) California as a national leader in the innovation economy.”

A legislative source involved in negotiations called the Chamber’s new position a “clever way to split the baby. Still engaged, still asking for the moon, still not opposed.”

Read the coalition's letters here: