California Insurance Wholesalers Look at Gig Economy Law

By | January 27, 2020

A sweeping California gig economy law was the focus of a lot of the talk this year during an annual insurance wholesalers conference.

Assembly Bill 5, California’s gig worker law was signed by Gov. Gavin Newsom in September and effective at the first of the year, makes it harder for gig economy companies to qualify their workers as independent contractors rather than employees.

The law has had broad labor support, but has lately drawn high-profile criticism and strong opposition.

A federal judge earlier this month temporarily blocked the law from impacting over 70,000 independent truckers by granting a “temporary restraining order” sought by trade group California Trucking Association while he considers imposing a permanent injunction.

Uber Technologies Inc. and Postmates Inc. have sued the state of California, alleging the labor rights law is unconstitutional.

Under AB 5, which mandates that workers can only be considered contractors if they perform duties outside the usual course of a company’s business, that state has a more straightforward test than a multifactor test that previously existed in California to determine which workers qualify for employee status and the attendant benefits, also known as the Bordello test.

“That was a huge gift for organized labor,” said John Norwood, an industry lobbyist and owner of Norwood Associates, said of AB 5 during the annual California Insurance Wholesalers Association conference in La Jolla, Calif., which ran from Jan. 12 to Jan. 14.

CIWA is a California state professional trade association for California insurance wholesalers and those who conduct business in or support the wholesale distribution system.

The group’s main objective is to represent the interests of members in the regulatory and legislative arena, and to promote the value of the wholesale distribution system and ensure a competitive insurance market for California businesses and consumers.

The group’s next meeting is in Monterey, Calif., from June 13 to June 17.

The conference in La Jolla covered a range of issues, including employee engagement, employment law and drones.

Norwood’s comments on AB 5 came during a legislative update he gives annually to conference-goers.

Norwood said that instead of creating a sweeping new law, the state should have found a way to adopt and streamline the more traditionally used ABC test. Some courts use this test look at whether a worker meets three criteria to be considered an independent contractor:

A worker is free from employer control or direction in performing the work.

The work takes place outside the usual course of the business and offsite.

A worker is engaged in an independent trade, occupation, profession, or business.

“That’s what they should have done in the first place,” Norwood said.

Meanwhile the law not only grows more controversial, but more confusing as opposing sides weigh in on how it should be enforced and interpreted by the courts.

“Every day that law and the interpretation of that law is changing,” said Kristi Dean, managing partner in Woodland Hills, Calif.-based Stone Dean Law.

Dean’s discussion during the CIWA conference was titled: “Employers Beware! 2020’s Avalanche of Labor Laws Await Us All.”

The law passed without the great opposition it’s currently seeing, but as those who will be impacted by it began to realize the law was soon to take effect, more and more parties began to weigh in loudly on AB 5, she said.

“I can tell you in the fourth quarter of 2019, all hell broke loose,” Dean said.

She noted that AB 5 does have numerous exclusions already built in, including for doctors, lawyers, insurance agents and real estate agents.

Trucking is where one of the biggest messes is created by AB 5.

Dean has been quite busy helping her trucking clients deal with the law and what it could do to their businesses.

She said the law could have “devastating” effects on the trucking industry.

She said the new law will also impact gig economy icons like Uber and Lyft, which are based on the business model in which workers are contractors and not employees.

“It has changed the industry that we know of in a very significant way,” Dean said.

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Insurance Journal West January 27, 2020
January 27, 2020
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