California Takes Aim at the Gig Economy

BREAKING NEWS: Uber says, despite the new law, it will not reclassify its independent contractors as employees because it is “a broader technology company” and its “drivers are doing work outside the company’s usual course of business.”

With only three days left in this year’s session, the California legislature has approved a bill that would virtually do away with independent contractors and make almost every worker an employee.

NLRB-rules-uber-drivers-are-contractorsGov. Gavin Newsom has indicated previously that he favors the act known as Assembly Bill 5, which would take effect on Jan. 1.

The stakes are high for Uber, Lyft, DoorDash and other companies that rely on independent drivers. Estimates run as high as 30 percent in additional costs for these companies if they are forced to make everyone an employee. Barclays, in fact, predicts that — should the California approach spread to other states — the companies will be forced into bankruptcy.

Uber and Lyft are already sponsoring a statewide ballot measure to get voters to overturn the legislation.

The bill codifies a California Supreme Court decision that set a high bar for treating a worker as an independent contractor, the so-called “ABC Test”:

  1. The worker is “free from the control and direction” of the company that hires them.
  2. The worker performs work that falls “outside the hiring entity’s usual course or type of business.”
  3. The worker has his own independent business or trade beyond the job for which they are hired.

NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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