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RELEASE: Estimating the Coverage of California’s New AB 5 Law

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FOR IMMEDIATE RELEASE
November 12, 2019

CONTACT
Mariam Hosseini: mariamh@berkeley.edu, 510-642-0086

New UC Berkeley Brief: The Vast Majority of Independent Contractors Will Be Covered Under AB 5’s ABC Test

Only 9% are exempted and are the highest earners; 64% are covered without exceptions, and another 27% are covered unless strict criteria are met.

Berkeley — A new brief by the UC Berkeley Labor Center finds that the overwhelming majority of independent contractors will be covered under the ABC test, which was codified by AB 5, the new California law that strengthens the criteria for worker classification. This is the first-ever analysis of which workers will and will not be covered in practice. In this brief, authors Sarah Thomason, Ken Jacobs, and Sharon Jan found that the vast majority of contractors — such as truck drivers, janitors, retail workers, childcare workers, and drivers working for Uber and Lyft — will be covered by the ABC test, with the exception of some high-earning occupations such as doctors, lawyers, and accountants. This analysis is restricted to workers who are independent contractors at their main job.

Using household survey data, the authors estimated the percentage of independent contractors that will (1) be covered by the ABC test with no exceptions, (2) covered by the ABC test except when very strict criteria are met, and (3) excluded from the ABC test entirely. Under the ABC test, a business can contract with a worker as an independent contractor if the work that the worker does is (a) under the worker’s control, (b) not part of the company’s core business, and (c) part of the worker’s primary profession.

The authors found that among all workers who are independent contractors in their main job in California, the ABC test will apply as follows:

  • 64% are covered without exceptions (common occupations include janitors, truck drivers, retail workers, and childcare workers);
  • 27% are covered unless very strict criteria are met, such as setting their own rates, processing their own payments, setting their own hours, scheduling their own clients, and having their own business license (common occupations include construction workers, hairdressers, and photographers); and
  • 9% are excluded (common occupations include real estate agents, lawyers, and doctors).

“It is important to note that the most common occupations that the ABC test will not apply to, like lawyers and doctors, tend to earn the highest wages,” said Sarah Thomason, Research and Policy Associate at the UC Berkeley Labor Center and co-author of the brief. “Conversely, those who usually earn lower wages, such as retail and childcare workers, are included under the ABC test.”

“We found that the most vulnerable workers will be protected under AB 5 because they are covered by the ABC test,” said Ken Jacobs, Chair of the UC Berkeley Labor Center and co-author of the brief. “Historically, these are the workers who were most likely to be misclassified, but now, it will be easier for them to access the protections they are entitled to — including minimum wage, overtime, workers’ compensation, and unemployment insurance.”

Click here to read the full brief.

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The Center for Labor Research and Education (Labor Center) is a public service project of the Institute for Research on Labor and Employment (IRLE) at UC Berkeley. IRLE connects world-class research with policy to improve workers’ lives, communities, and society.