United States: AB 5 Update: California Senate Committee "Suspends" Discussion, For Now

This article is an update to prior publications from Littler's Workplace Policy Institute regarding Assembly Bill 5, currently pending in the California legislature.

With the resumption of the current legislative session on August 12, 2019, the California Senate Appropriations Committee briefly considered Assembly Bill 5 (AB 5), the legislature's purported solution to the California Supreme Court's opinion in Dynamex v. Superior Court (Dynamex). In Dynamex, the Supreme Court abruptly changed longstanding law governing worker classification, and exposed thousands of California businesses to potential retroactive liability.

The Appropriations Committee heard testimony from a representative of the California Finance Department (Finance). Finance has not published an official analysis of AB 5, but its representative reported that the bill would result in substantial state expenditures in the coming years in the form of: (1) an increase in claims for unemployment insurance benefits; (2) the added administrative burden of processing this increase in claims for unemployment insurance benefits; and (3) the added burden to the Department of Industrial Relations by virtue of assuming enforcement jurisdiction over hundreds of thousands of workers who, until Dynamex, were legitimately classified as independent contractors.

Several members of the public appeared and expressed urgent need for legislative relief from the Dynamex decision. Representatives of the California Coalition of Travel Organizations, owners of travel agencies, and individual travel agents appeared and voiced support of the bill "if amended" to except travel agents. Similarly, owners and representatives of language services businesses appeared and voiced support of the bill "if amended" to except language services. Travel agents, interpreters, and translators are among the numerous classifications of workers who, prior to Dynamex, were frequently classified as independent contractors, to the benefit and preference of workers and businesses.

Senator Brian Jones, a member of the Committee, roundly criticized the Supreme Court's opinion in Dynamex as "one of the worst decisions that court has ever made." He complained that the burden now falls on the legislature to "solve the problems that the California Supreme Court made for us."

Testimony from the Department of Finance left the Committee with no alternative but to refer AB 5 to the Suspense File. The "Suspense File" is a creature of Senate Appropriations Committee Rule 8. The rule provides:

The committee, by a majority of the members present and voting, shall refer to the Suspense File all bills that would have a fiscal impact in any single fiscal year from the General Fund (including general obligation bond funds) or from private funds of $50,000 or more.

...

The committee, by a majority of the members present and voting, shall refer to the Suspense File all bills that would have a fiscal impact in any single fiscal year of $150,000 or more from any special account(s) or fund(s).

...

For purposes of the above paragraphs, "fiscal impact" shall include cost increases, cost pressures, revenue decreases, increases in appropriations, and reductions in the State's appropriations limit, notwithstanding any offsetting revenues.

...

Upon two days' notice in the Senate File, the chair may place before the committee a bill on the Suspense File. A bill placed on the Suspense File may only be moved to Second Reading by an action of the committee or an action of the Senate.

A bill on the Suspense File is effectively "on hold" until proponents of the bill accomplish one of the following two procedures. First, and most commonly, the Chair of the Appropriations Committee may place the bill before the Committee and, on a majority vote, move the bill back to the Senate Floor. To make this happen, proponents of the bill must both persuade the Chair of the Committee to place the bill before the Committee and secure the support of a majority of the Committee members. That persuasion and lobbying is not open to the public. Second, and less common, a proponent of the bill may move the Senate to vote the bill out of the Suspense File and back to the Senate Floor. Proponents of the bill will have to accomplish one of these tasks immediately, likely before this Friday, August 16, 2019, if they wish to advance the bill.

Even then, the legislature must accomplish substantial additional work during the 19 business days remaining in the legislative session from Monday, August 19, through the close of the current session on Friday, September 13.

At a minimum, the following tasks are required. The Senate must conduct a Second Reading, publish a formal analysis, conduct a Third Reading, vote, and send the bill back to the Assembly. The Assembly must vote to concur with the amendments the Senate has made since the Assembly passed the bill months ago. It is quite possible, but not guaranteed, that the legislature will accomplish these tasks in the time remaining.

Despite these remaining procedural challenges, many individuals with knowledge of the legislative process in Sacramento have expressed confidence that AB 5 will make its way to the governor's desk.

For his part, Governor Newsom has avoided expressing any opinion whatsoever regarding AB 5. He has stated, "I have a deep position to advance the conversations. If my position was explicit, those conversations would end."1

For a more complete analysis of AB 5, refer to AB 5: The Great California Experiment – A Littler Workplace Policy Institute Report.2 Littler's Workplace Policy Institute will continue to track the progress of this important bill and will provide updates as they occur.

Footnotes

1 Joe Garofoli, Gavin Newsom dodges taking a stand on California's gig-worker bill, S.F. Chron., June 25, 2019.

2 Bruce Sarchet et al., AB 5: The Great California Experiment – A Littler Workplace Policy Institute Report, WPI Report (Aug. 8, 2019).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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