Workers Comp Zone

AB 2496 and DYNAMEX

AB 2496 (Gonzalez Fletcher) has been passed by the California legislature and is on its way to Governor Brown’s desk.

AB 2496 would essentially codify Dynamex in determining the employment status of janitorial workers.

This comes at a time when there is a lot of heat in the Capitol over the California Supreme Court’s decision known as Dynamex.

Back to AB 2496 in a moment. But first some explanation on Dynamex. In Dynamex the California Supreme Court adopted a simpler but much more expansive test for determining whether a worker is an employee instead of an independent contractor. That test is known as the ABC test and uses only three factors in comparison with the  test set forth in the Borello case that has been used in California for decades. Dynamex involved wage and hour issues and did not address employment for workers’ comp purposes.

Many of the so-called gig economy companies see Dynamex as a mortal danger to their business models. With its more expansive definition of who is an employee, many feel that it will be just a matter of time til the ABC test is used for determining employee status in all aspects of the California employment relationship.

Yesterday there were dueling rallies at the State Capitol by groups supporting and opposing Dynamex. The California Chamber of Commerce is leading a coalition of opponents, the “I’m Independent Coalition”. Opponents want Brown to take action to impose a moratorium on Dynamex. A recent Sacramento Bee op-ed by the CalChamber’s Alan Zaremberg outlines the thinking of opponents:

“Because of the potential disruption, the business community is asking the Legislature to immediately limit the court’s ruling to the workers directly involved in the Dynamex case and not have the decision apply to other contractors for the next two years”.

“Although the justices may have had all the necessary facts to make an appropriate decision in the Dynamex situation, they could not consider all the other workers, businesses and consumers who rely on the independent contractor business model. The appropriate role of the Legislature is to determine the broad-based rule beyond what was decided by the court.

It is important to note that the court based its ruling on a government regulation that was last reviewed before invention of the smart phone. The Industrial Welfare Commission, which was established in 1913 to regulate hours, wages and working conditions, created the rule. But it has not been funded since the Gray Davis administration and the commission could never have imagined an on-demand economy powered by mobile devices. It seems obvious that it is time for the state to fund and reconvene the commission to update this obsolete regulation.

With all that is at risk for workers and our economy, the Legislature should act quickly.”

A recent article by Josh Eidelson in Bloomberg notes that Bloomberg obtained a July 23 letter to Governor Brown demanding a fix to Dynamex. The letter was signed by officials from Uber, Lyft, Postmates, Door Dash, Square, Instacart, Task Rabbit, Total System Services and Handy Technologies.

Handy provides a platform for home cleaning services.

California labor unions and labor advocacy think tanks applauded Dynamex and oppose efforts to limit or end its application.

What makes this interesting is that AB 2496, which institutes a Dynamex test, is on its way to the Governor. AB 2496 was passed by the California Assembly on a 57 to 7 floor vote, with 14 not voting. On the California Senate side, the vote was 29 to 4, with 7 votes not recorded.

AB 2496 provides that janitorial workers employed by a janitorial contractor have a rebuttable presumption of being employees rather than independent contractors. To rebut the presumption , AB 2496 has a three part test akin to the test in Dynamex.

If signed by the Governor, AB 2496 would be the first post-Dynamex legislative codification of the three prong ABC test.

I’m not aware that there has been any public statement by the Brown Administration on either sponsoring a fix to Dynamex or on the Governor’s intentions regarding AB 2496.

This could be fascinating.

Here is the Senate Analysis of AB 2496:


Stay tuned.

Julius Young