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New California Bill Poses Challenges to Gig Economy

California is on its way to passing a law that would more or less eliminate independent contractors, presenting a potentially major blow to the gig economy.

In May 2018, the California Supreme Court issued a landmark decision in the Dynamex Operations West Inc. v Superior Court of Los Angeles case, finding that most workers are, and should be presumed to be, employees rather than independent contractors.  The Court also adopted the “ABC test”, which lays out three criteria for classifying a worker as an independent contractor. The worker is deemed to have been “suffered and permitted to work” as an independent contractor only if the employer meets the following three criteria:

“(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and

(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”

If the employer cannot prove that the worker meets all three requirements, the worker is considered an employee.

On May 29, the California state Assembly passed a bill known as AB5 that would expand the Dynamex decision. The Dynamex decision only applied to wage and hour issues, but AB5 would include workers’ compensation, rest and meal breaks, parental leave, and other benefits.

This bill would have a tremendous impact on companies that rely on independent contractors, such as Uber, Lyft, transportation companies, and tech companies like Google.  If passed, tens of thousands of independent contractors in California could be reclassified as employees and begin to receive the same benefits as employees.  It could also increase the state’s tax revenue by as a much as $7 billion.

The bill will now go to the state senate for a vote. We will continue to report on the issue.

In the meantime, you can read about the Dynamex decision and bill AB5 here: https://www.vox.com/policy-and-politics/2019/5/30/18642535/california-ab5-misclassify-employees-contractors?link_id=2&can_id=296837f367fc5ae5c386dcb443cc6374&source=email-todays-headlines-jobs-with-justice-53119&email_referrer=email_556655&email_subject=todays-headlines-jobs-with-justice-53119

 

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