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Michelle Craig 170

AB-5 and ACI Certification

How the New Gig Worker Law Impacted Our Chapter

Our Chapter utilizes 75-80 of the industry's best and dedicated professional engineers and certified technicians to conduct its Certification Program efforts.  Each of them has willingly executed an Independent Contractor Agreement each year, been fairly compensated for their services, and received the required IRS Form 1099MISC at the end of each year.  Until now. 

A little background....

In April 2018, the California Supreme Court issued a landmark decision in the case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles.  The decision reinterpreted and rejected the Borello test for determining whether workers should be classified as employees or independent contractors.  The Court embraced a standard presuming that all workers are employees, and placed the burden on any entity classifying an individual as an independent contractor of establishing that such classification is proper under a newly written "ABC Test".  The ABC Test includes the following:

     A)  The worker is free from the control and direction of the hirer in connection with the performance of the work, both under contract for the performance of such work, and in fact, AND
     B)  The worker performs work that is outside the usual course of the hiring entity's business, AND
     C)  The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity.

Under the authorship of Assemblyman Lorena Gonzalez, Assembly Bill 5 (commonly referred to as the Gig Worker Law) was drafted in January 2019 in order to codify the Dynamex ruling.  AB-5 was signed into law by the Governor on September 18, 2019, and became effective January 1, 2020.  While the legislation was originally intended to address independent delivery and on-demand drivers, the language was so broad it caught many unintentional targets.  Among those are Little League coaches, photographers, freelance writers, and the Chapter's certification workers.

The resulting impact....

The Chapter's Board of Directors has been following the Dynamex ruling and subsequent legislation since 2018.  It was generally well know that the gig economy heavyweights would be actively pursuing overturning the Court decision, followed by extensive legal efforts to have AB-5 repealed.  A significant amount of Chapter staff time was expended studying the impact of converting certification staff from independent contractors to employees, consulting legal counsel, reaching out to ACI International's management, and preparing and presenting the information to the Chapter Board of Directors to aid them in making their decision regarding compliance.  In addition to the staff burden of developing HR policies, personnel forms, interviewing and hiring a payroll service, and on-boarding all the workers in accordance with state and federal employment laws, the increased expense created by employer payroll taxes and workers' compensation insurance would have to be evaluated in the Chapter's pricing for examinations.  At its December 2019 meeting, mindful of its fiduciary responsibility to its members, the Board determined it would be necessary for all certification staff to be hired as Chapter employees beginning with the first program in January 2020.  Prompted by the increased operational costs due to new government regulations, the Board also regretfully approved a $25.00 increase in certification exam fees.

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