Alan Levin, a Partner in Locke Lord’s Hartford and New York offices, and Richard Reibstein, a Partner in Locke Lord’s New York office and co-head of the Firm’s Independent Contractor Misclassification and Compliance Practice, were quoted in an article from Financial Time’s Life Annuity Specialist publication examining the Assembly Bill 5 in California that was passed overwhelmingly by the Assembly and is awaiting action from the state Senate. If passed, the bill, which seeks to codify the three-pronged “ABC” test created by the California Supreme Court in April 2018, would make it much more difficult to classify workers as independent contractors for all industries except those exempted – and one of the exceptions is for licensed insurance agents.
Levin noted that if the state Senate were to remove a carve-out that exempted licensed insurance agents, the proposed legislation would potentially “shake the foundations” of how insurance policies are distributed and serviced in the state. He continued saying that the carve-out in Assembly Bill 5 for insurers is “absolutely essential” because the legislation would otherwise change the landscape for insurance companies in California. Levin also noted that the language involving insurance will most likely be retained in the final bill.
Reibstein also weighed in, saying that the full implications of the bill are unclear, because the “B” prong of the ABC test, a requirement that a contractor performs work outside of the usual course of the service recipient’s business, hasn’t been litigated in California. He cautioned that, even with the exemption in the bill, insurers shouldn’t let their guard down.
“This is the most important issue facing the insurance industry at this time,” Reibstein said. “Insurance companies cannot be complacent and count on past decisions to apply to them, especially when class action lawyers are targeting the industry and continuing to bring misclassification cases.”
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