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AB 5: California’s Cautionary Tale of Independent Contractor Regulation


Over a century ago, IRS form 1099 created a formal tax classification for freelance workers. Debates over the designation of workers as employees or independent contractors have existed in the political landscape of the United States ever since. Employment laws that establish rights for employees and requirements of employers have led many corporations to expand their hiring of independent contractors. Proponents of independent contractor work emphasize its flexibility and the freedom it affords individuals who choose to take on those roles. Opponents caution that employers don’t give independent contractors the same social safety nets as employees, and compensating for lack of benefits can come at a huge cost.

These debates have only grown louder in recent years with the growth of the so-called “gig economy,” a marketplace of temporary work conducted by freelancers and other independent contractors, often through online platforms.1 Between 2012 and 2015, the “platform economy” grew ten-fold—and calls for regulation followed.2 As the market share of platform economy giants like Uber, Lyft, Postmates, and other similar app-based services grew, the conversations over their regulation gained momentum and national recognition.3

California was one of the first states to introduce major legislation intended to crack down on platform economy giants. As the home of Silicon Valley, and hub of many platform headquarters, it was a natural fit for this fight. In 2019, California’s legislature codified a State Supreme Court decision that had sweeping effects on the independent contractor market, with lawmakers specifically mentioning app-based gig work platforms. Strong and well-resourced opponents of the law managed to force a ballot initiative to carve out substantial exemptions. As other states gear up to take on similar fights they should look to this California saga for an idea of the obstacles that may await them.4


This California law began in April of 2018 with the case Dynamex Operations West, Inc. v. Superior Court, in which a group of delivery drivers claimed that they were improperly classified as independent contractors, thereby denying them certain employment benefits and protections.5 The unanimous opinion established several crucial holdings, including a presumption that workers are employees, and a burden shift onto the hiring entity to establish that a worker is instead an independent contractor.6 It also established the “ABC test” to determine whether a worker has been misclassified—a three prong test that assesses various aspects of the parties’ working relationship.7 Versions of this test exist in many other jurisdictions around the country.

In December 2018, the California Legislature introduced Assembly Bill 5 (AB 5), and Governor Gavin Newsom signed the Bill into law in September 2019. The Bill aimed to provide greater protections to California workers whose jobs classified them as independent contractors, thereby denying them traditional employment benefits. It codified into law the ABC test from Dynamex.8 It took effect on January 1, 2020.

AB 5 was immediately controversial, and social media campaigns and protests sprung up quickly in response.9 As public pressure rose and support for the bill waned, Governor Newsom signed an amendment expanding the list of professions exempt from the ABC test. This addressed many issues faced by the arts and entertainment industries, and it took effect on September 4, 2020.10

Companies like Uber and Lyft, however, were still denied exemptions under AB 5.11). Both of these companies, as well as others who employ large numbers of gig workers like Doordash and Postmates, pledged millions to fight the law.12 They spent millions on advertisements for Proposition 22, a state-wide ballot initiative drafted as a direct response to AB 5, which defined app-based transportation and delivery drivers as independent contractors and adopted labor and wage policies specific to app-based drivers and companies.13 Overall, these business poured nearly $200 million into the fight for Prop 22, which passed during the November 3, 2020 election.14

But the fight is far from over. In January of 2021, a group of Uber and Lyft drivers filed a lawsuit in the California Supreme Court to overturn Prop 22 challenging its constitutionality.15 In the meantime, gig workers maintain that their pay has actually decreased since the measure passed.16


With strong positions on either side of the debate about the prevalence of freelance gig work, this bill was sure to be somewhat controversial. However, it seems like California’s legislature may have underestimated the law’s opponents. Opposition to the bill came not only from large corporations, but from a diverse array of freelancers. Almost a year of protests ensued, with participation not only from app-based gig employers, but also large numbers of entertainment and arts professionals.17. These pervasive negative sentiments, coupled with several well-resourced corporate campaigns led to several statutory exceptions. This eventually resulted in a version of the law that accomplishes few of its intended goals.

This conversation about independent contractors will not subside anytime soon, and it will continue on a national level. It was a popular topic of discussion in the 2020 Democratic Primaries, with several candidates endorsing AB 5 and lauding California as a leader for workers’ rights.18 The Biden Administration has already begun overturning Trump-era independent contractor classification rules.19 Many gig workers supported the bill and saw it as a steppingstone toward an eventual goal of unionization.20 And other state legislators are drafting and introducing their own bills promoting protections for gig workers.21

For the next legislature to take on this battle, the question becomes how to avoid a situation like California’s. It may seem futile to fight against powerful, well-resourced corporations that have a massive stake in the matter and will do everything they can to maintain the status quo. However, it was not only these companies that pushed back against AB 5. The year between the passage of the bill and the signing of the AB2257 amendment was a calamitous one for the arts, media, and entertainment industries, which caused some unexpected parties to join the fight.22 One of the more high-profile examples of this came from Vox Media, which terminated contracts with hundreds of freelance writers and editors in December 2019, citing challenges brought about by AB 5.23 By being overly broad, California legislators may have gained more opponents than they bargained for and ended up having to fight a battle on too many fronts. If the intent is to target large platform economy employers, other state lawmakers should appropriately tailor their proposed bills to do just that. It may make their fight just a little simpler.

  1. Gig Economy, Investopedia, (last visited March 15, 2021). 


  3. Claire Zillman, Hillary Clinton: I’ll crack down on sharing economy abuses, Fortune (Jul. 13, 2015) 

  4. Evie Fordham, Is New York the next California on gig economy regulation? Fox Business (Jan. 9, 2020) 

  5. Dynamex Operations W. v. Superior Court, 4 Cal.5th 903 (Cal. 2018). 

  6. Id. 

  7. Id. 

  8. Emp. Dev. Dep’t, St. of Cal., AB 5 – Employment Status, (last visited Dec. 16, 2020). 

  9. See, e.g., Jason Boog, California Creatives Rally to Repeal AB5 Legislation, Publishers Weekly (Jan. 29, 2020) 

  10. See AB 5 “2.0” – California Tweaks its Independent Contractor Ban, Nat’l L. R. (Sept. 8, 2020) 

  11. Carolyn Said, Uber, Lyft lose appeal in California court over whether drivers should be employees, SF Chronicle (Oct 22, 2020 

  12. Carolyn Said, Judge denies Uber, Postmates request to halt AB5 enforcement, SF Chronicle (Feb. 10, 2020) 

  13. California Proposition 22, App-Based Drivers as Contractors and Labor Policies Initiative (2020), Ballotpedia,,_App-Based_Drivers_as_Contractors_and_Labor_Policies_Initiative_(2020) (last visited Dec. 16, 2020). 

  14. George Skelton, It’s no wonder hundreds of millions have been spent on Prop. 22. A lot is at stake, LA Times (Oct. 16, 2020),; Sara O’Brien, Prop 22 passes in California, exempting Uber and Lyft from classifying drivers as employees, CNN (Nov. 4, 2020), 

  15. Andrew J. Hawkins, Uber and Lyft drivers in California sue to overturn Prop 22 ballot measure, The Verge (Jan. 12, 2021) 

  16. Michael Sainato, ‘I can’t keep doing this’: gig workers say pay has fallen after California’s Prop 22, The Guardian (Feb. 18, 2021), 

  17. Jason Boog, California Creatives Rally to Repeal AB5 Legislation, Publishers Weekly (Jan. 29, 2020) 

  18. Alexandria Sage, California Senate passes bill to tighten ‘gig’ worker rule, Reuters (Sept. 11, 2019); Elizabeth Warren, To stop shameful exploitation of ‘gig economy’ workers, let’s start with this bill, The Sacramento Bee (Aug. 14, 2019); Ben Christopher, Harris belatedly joins other presidential candidates in California fight over “gig” workers, Cal Matters (Aug. 14, 2019) 

  19. Justin Barnes & Jeffrey Brecher, Biden DOL Proposes Withdrawal Of Former Administration’s Join Employer And Independent Contractor Final Rules, JD Supra (March 15, 2021) 

  20. Gabrielle Canon, California AB 5: Lyft and Uber drivers from across state rally in Sacramento for gig economy bill, USA Today ( ug. 28, 2019) 

  21. Lauren Feiner, Gig companies prepare to bring their fight for independent work nationwide under a more skeptical Biden administration, CNBC (Feb. 27, 2021)

  22. See Brendan Rawson, California’s new gig worker law is disrupting the music industry and threatening all performing arts,  Cal Matters (Jan. 9, 2020)

  23. Suhauna Hussain, Vox Media cuts hundreds of freelance journalists as AB 5 changes loom, LA Times (Dec. 17, 2019)