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California Prop 22 – Nationwide Effect on Workers Comp Debate

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California Prop 22 – Not Just A One State Issue

California Prop 22 was overwhelmingly given a thumbs up by the Golden State’s Voters.

state flag of California Prop 22
Pubilc Use License – Makaristos

If you are saying, yes, but I do not live in California, check out the last heading in this article  – worth your time.

For many years, California had moved towards defining independent contractors as employees.

California Assembly Bill 5 (AB 5) was passed in 2019. The effects on the independent contractor vs. employee debate were chilling.  The Dynamex Supreme Court decision was the basis for AB 5.

AB 5 enumerated each industry where the workers should be considered employees.  The Dynamex Decision was very vague as to the exact companies that should not allow the independent contractor classifications.

From truckers to independent press contractors – AB 5 changed the rules of having independent contractors working for your firm.

For instance, many independent writers of worker’s comp articles seemed to disappear overnight. Due to privacy, I will not mention them by name.

When I traveled to what I thought was going to be an all-day WCIRB Conference earlier this year, I even asked the question to the presenter after they presented on the Class Code changes involved with AB 5

There are at least three Assembly Bills pending that contradict AB 5 – what effect will that have on how the WCIRB views any Class Code changes or premium audits that involve independent contractors?  The WCIRB told me that they would have to get back to me.  Fair enough. 

According to the Ballotpedia (Updated 10:30 AM Eastern Time today), 58.4% of California voters checked Yes on their ballots.   By the way, if you have not visited Ballotpedia, it is worth a look.

The Beginning of AB 5 – Dynamex Decision

The Dynamex Decision provided the three tests to see if a California worker was an employee or an independent contractor – they are-

The worker is:

  1. Free from the hiring company’s control and direction in the performance of work
  2. Doing work that is outside the company’s usual course of business; and
  3. Engaged in an established trade, occupation, or business of the same nature as the work performed

After the Dynamex decision, many employers contacted J&L/me on premium audit and policy confusion.   Their basic question was – How do we tell if the workers working for us are contractors or employees?

What California Prop 22 Does Not Do

California Prop 22 does not define any other employees/contractors beyond independent drivers such as Uber, Lyft, and Doordash.

Earlier I mentioned reporters and other types of workers – these workers are still under AB 5/Dynamex presently.    Prop 22 covered a very defined section of independent contractors.

More workers may be added to the independent contractor list in the future.

What California Prop 22 Means For Companies Not in CA

One of my catchphrases is  – what happens in California will be coming to a state near you.   The Golden State always seems to make rules and regulations that are often adopted by other states in some form.   Massachusetts and Tennessee even used some of AB 5’s wording in introduced legislation.

Bottom line – make sure your independent contractor contract spells out everything in great detail.  Do not use a boilerplate contract.  A different version of AB 5 or California Prop 22 may show up in your state – be prepared.

 

 

 

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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