24 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com Code, and Wage Orders. In 2020, the Legislature passed AB 2257, which revised the law, primarily to expand certain exemptions from the ABC test.114 While the law is expansive in scope, it contains numerous industry and position-specific exemptions. For example, it exempts particular workers (including physicians, dentists, podiatrists, psychologists, architects, investment advisers, direct sales salespersons, real estate licensees, commercial fishermen, and other workers).115 Exemptions also apply for workers providing “professional services,” including certain marketing and human resources professionals, travel agents, and certain types of artists, writers, and photographers, provided that specific business/operational criteria are met.116 The law also exempts “bona fide business-to-business contracting relationships” between a hiring entity and another entity that is a sole proprietorship, partnership, limited liability company, limited liability partnership, or corporation (a “business service provider”).117 A long list of criteria must be met for a business to qualify for the business-to-business exemption.118 Among them is a showing that the business provides services directly to the contracting entity and not to that entity’s customers (unless certain circumstances are present). There are numerous aspects of the law that are unclear, which makes it difficult for employers to ensure they are in compliance. Further, numerous industry groups continue to lobby the Legislature and promote ballot measures to add additional exemptions, and to challenge the law in the courts. In the coming years, we expect to see additional clarification and refinement of the law from the California Legislature and the courts. D. The Battle Over AB 5 1. California Trucking Ass’n v. Bonta: AB 5 Enforced as to Motor Carriers Legislative adoptionof the ABC test sparked a great deal of resistance from employer groups. In California Trucking Ass’n v. Becerra, the California Trucking Association challenged AB 5 and sought a preliminary injunction on the grounds that the law was preempted by the Federal Aviation Administration Authorization Act of 1994 (“FAAAA”) and by the Dormant Commerce Clause.119 The California Trucking Association initially succeded in obtaining a preliminary injunction. Becerra relied on a state trial court decision, California v. Cal Cartage Transp. Express, LLC, No. BC689320 (Los Angeles Superior Ct. Jan. 8, 2020), which held that the ABC test effectively prohibits motor carriers from using independent contractors to provide transportation services and thus 114 AB 2257 enacted Labor Code section 2775 et seq., which codifies the ABC test. 115 Cal. Lab. Code § 2783. 116 Cal. Lab. Code § 2778. 117 Cal. Lab. Code §§ 2775-2776. The law clarifies that workers for these entities are not covered by the business-tobusiness exemption, which applies only to the business entity itself. It is not entirely clear how the business-to-business exemption applies to these entities (as an entity is not a person that can perform work), but it is likely that the exemption applies where an individual is operating as a legal entity. The exemption does not apply to other workers for these entities. 118 See Cal. Lab. Code § 2776. 119 433 F. Supp. 3d 1154, 1160 (S.D. Cal. 2020), rev'd sub nom. California Trucking Ass'n v. Bonta, 996 F.3d 644 (9th Cir. 2021).
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