California Gov. Gavin Newsom’s proposed state budget calls for $20 million to enforce the AB 5 law that gets tough in independent contractor compliance, the San Francisco Examiner reported. AB 5 codifies the more strict ABC test for determining independent contractor status. The law has raised concerns among human cloud firms, and one firm recently decided to focus on other states than California in the wake of the law.
Meanwhile, a Los Angeles County Superior Court judge has ruled AB 5 does not apply to independent truck drivers in the state because the measure is preempted by federal law.
AB 5 and the California Supreme Court Dynamex decision, which gave rise to the legislation, “run afoul of Congress’s 1994 determination in the Federal 12 Aviation Administration Authorization Act … that a uniform rule endorsing use of non-employee independent contractors (commonly known in the trucking industry as “owner-operators”) should apply in all 50 states to increase competition and reduce the cost of trucking services,” according to court documents.