An Overview of the Gig Economy

JurisdictionCalifornia,United States
AuthorDesiree Macedo
CitationVol. 32 No. 1
Publication year2023


Desiree Macedo1

On November 3, 2020, California voters approved Proposition 22, the Protect App-Based Drivers and Service Act.2 This Proposition brought substantial changes to California's classification of certain app-based drivers.

This article focuses on prior case law and legislation, including Dynamex Operations West, Inc. v. Superior Court of Los Angeles (Dynamex),3 Assembly Bill 5 (AB-5),4 and Assembly Bill 2257 (AB-2257);5 as well as current litigation which may impact the classification of gig workers.


On September 18, 2019, Governor Gavin Newsom signed AB-5 into law, effective January 1, 2020. AB-5 codified the ruling of Dynamex, a decision by the California Supreme Court, which restricted employers from labeling its workers as independent contractors rather than employees.6

In Dynamex, the California Supreme Court created the ABC test, a new standard of presumption that all workers are employees to ensure workers are entitled to employee benefits such as: health coverage, workers compensation insurance, safety regulations, and minimum wage requirements.7

Under the ABC test, a worker is presumed to be an employee unless the employer can prove all of the following: (a) the person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; (b) the person performs work that is outside the usual course of the hiring entity's business; and (c) the person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.8

To overcome the presumption that the worker is an employee, all of the requirements must be satisfied.9

AB-5 placed the burden on the employer to adhere to the newly adopted ABC test before a worker may be labeled as an independent contractor.10


AB-5 underwent a significant makeover when Governor Gavin Newson signed into law AB-2257 on September 4, 2020.11 The measure included several new exemptions, as well as revisions to existing law related to exemptions for business-to-business relationships, referral agencies, professional services, and performance artists.12


AB-5 provided an exemption to business service providers to contract with another business to provide services.13 The business-to-business exemption only applied to "a business entity formed as a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation."14 In order to qualify for the business-to-business exemption certain qualifications must be met.15

AB-2257 provided greater clarity by further defining the requirements of the business-to -business exemption by describing the terms required in a written contract, expanding a business location to include business service provider's residence, and stating that work materials must be provided by the business service provider.16 AB-2257 also expanded the business-to-business exemption to apply to a "public agency or quasi-public corporation" that has retained a contractor.17


AB-2257 created a "single-engagement" exemption for "a stand-alone non-recurring

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event in a single location, or a series of events in the same location no more than once a week."18


The Dynamex decision did not apply to the relationship between a referral agency and a service provider; therefore, AB-5 created an exemption for businesses that provided services to clients through a referral agency.19 AB-2257 significantly expanded the scope of the referral agency exemption.20 AB-2257 expressly applied the exemption to a non-exclusive list of additional services including: graphic design, web design, photography, tutoring, consulting, youth sports coaching, caddying, wedding or event planning, services provided by wedding and event vendors, minor home repair, moving, errands, furniture assembly, animal services, dog walking, dog grooming, picture hanging, pool cleaning, yard cleanup, and interpreting services.21


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