California Assembly Bill to Limit Contractor Status for Gig Workers
Senate and signed by Governor Newsom. According to a report in the San Francisco Chronicle, hundreds of thousands of independent contractors ranging from Uber and Lyft drivers to manicurists could become employees under AB5.
What This Means
The bill essentially applies three-part criteria known as the “ABC test” to determine whether a worker is a contractor or an employee. In order to be an independent contractor, the worker must be free from a company’s control, do work that is not central to the company’s business and have an independent business in the trade. The bill’s author, Assemblywoman Lorena Gonzalez, a Democrat from San Diego, said companies often classify workers as independent contractors to dodge providing them minimum wage, overtime, workers’ compensation, disability and other benefits.
Gonzalez and proponents of this bill believe the law will provide workers with basic job protections. So far, the bill exempts doctors, dentists, lawyers, architects, accountants, engineers, insurance agents, investment advisers, real estate agents, direct sellers and hairstylists who rent booths as salons and marketers and human-resources professionals who hold advanced degrees. Business lobbies are attempting to get more exemptions including for Uber and Lyft drivers, freelance writers, graphic designers and other job categories.
Understanding the ABC Test
So, what makes a worker an employee? Under this bill, it’s a three-part standard known as the ABC test. A worker is an independent contractor only if all three of the following apply:
- Control: The company that is hiring the worker does not direct how the work is done.
- Scope: The work is in a field that is different from the hiring company’s business.
- Independence: The worker runs a business doing the same kind of work performed for the hiring company.
Our California employment attorneys will be closely watching this bill, which could potentially become law and change California’s employment landscape. This is a much-needed law in California where the “gig economy” has taken over. While working temporary jobs provides autonomy to workers because they can pick and choose when and how they want to work, it also has an impact on the benefits and wages they receive. Many gig workers miss out on crucial benefits such as healthcare.
Our law firm has gone after a number of large companies that have misclassified full-time employees as contractors in an attempt to duck giving them due wages and benefits. If this law is passed, lawmakers should also institute significant fines for violators so the law is properly followed and enforced.