AB 5’s Legacy in 2025: Misclassification Still a Major Compliance Risk

California employers have not roundly complied with a new law intended to ensure proper classification of workers in the state. If this applies to you, the California wage and hour lawyers at Skapik Law Group can help.

AB5 committed a landmark California Supreme Court decision about the classification of workers to law. However, recent enforcement actions since the passage of the law indicate that there is still an ongoing problem. Wage and hour laws apply to the classification of workers, and you can file a class action lawsuit.

Fight back against illegal employer practices by hiring a wage and hour attorney at Skapik Law Group for your potential case. We offer free consultations, and you can schedule one by calling us today at (909) 398-4404.

AB5 Codified a Strict Test for Classification

California law AB5 was intended to address the issue of workers being properly classified as employees and not independent contractors. However, over five years after Governor Newsom signed the bill into law, misclassification is still an issue in California. Not only have certain large companies managed to gain exceptions from the requirements of the law, but other businesses continue to wrongfully treat certain workers as independent contractors.

AB5 did not necessarily make it illegal for businesses to classify workers as independent contractors. What the law did do was commit the typical “ABC test” to law. The statute now puts the burden of proof on companies to show that one who is classified as an independent contractor meets each of the following three prongs:

• They are free from the control of the company
• They are independently established in their own business
• The work performed is outside of the company’s usual business

Resolving potential classification issues has not necessarily improved the financial situation of workers in California. Although overall earnings are up in the state, research shows that those who may have been categorized as independent contractors are now working longer hours at a lower rate.

Further, there is a misimpression that the legislation represented a sea change in California law. AB5 merely codified a test that had been used by the courts since the Dynamax case in 2018. That case introduced the ABC test, which was much stricter than the prior test.

Businesses Have Faced Consequences for Breaking the Law

The Department of Labor has filed numerous enforcement actions against companies that have broken the law. Shortly after the law’s passage, the state took action against a Southern California car wash company because it failed to provide certain benefits that it would have otherwise owed workers who should have been classified as attorneys.

There are signs that there may be some incremental progress under AB5. For example, companies like Ryder and Costco have faced an enforcement action from the state’s Department of Labor because they exhibited signs of control over workers who were supposedly independent contractors. This was the first legal action to be filed against a trucking company. Although the enforcement action should be considered a positive development, it is also a sign that there is enough of an ongoing problem that the state needs to send a sign to businesses that continue to engage in illegal practices.

You Can File a Class Action Lawsuit for Misclassification

Nonetheless, misclassification still appears to be a problem in California, as it was prior to the passage of the law. Several large companies, such as those who provide rideshare and app delivery services, have gained exemptions from the law. Other companies are still aggressively misclassifying workers in violation of the law.

The good news is that AB5 does strengthen your own potential ability to hold the company legally responsible under wage and hour law. When you file a misclassification lawsuit, the burden of proof is placed on the employer to show that you meet all of the elements of the ABC test. Workers have been successful in misclassification lawsuits. For example, Instacart workers who were misclassified as independent contractors successfully sued the company and settled the class action lawsuit for $46.5 million. At the same time, several industry groups have unsuccessfully sought to challenge AB5 in court. The result is that compliance is still an ongoing legal issue, and you can hold a business legally responsible in a class action lawsuit if they have broken the law and misclassified you as an independent contractor.

Contact a California Wage and Hour Law Firm Today

If you believe that your employer has denied you certain pay and benefits because they wrongfully claim that you are an independent contractor, speak to a wage and hour attorney in California at Skapik Law Group. You can schedule a free initial consultation by visiting our website or by calling us today at (909) 398-4404.