California isn’t shy when it comes to making the daily headlines. Often heralded as a progressive utopia, the Golden State recently signed into law Assembly Bill 5 (AB5), which will change the landscape of the gig worker economy. Stemming from the groundbreaking court decision established in Dynamex West Inc. v. Superior Court of Los Angeles, the California Supreme Court found Dynamex’s workers were misclassified as independent contractors rather than employees.
In a unique twist, the court shifted the burden to the nationwide courier and delivery service to prove their drivers were not employees by using the “ABC test.” Under this new test, an individual is presumed to be an employee, unless the employer can prove all of the following:
(A) the worker is free from the company’s control
(B) the worker performs work that isn’t central to the company’s business and (C) the worker has an independent business, trade or occupation in that industry.
This three-part standard will be the deciding factor for AB5 on whether workers are properly classified as independent contractors or need to be reclassified as employees. Many employers view this new law as a nightmare and gig workers feel it’s an attack against their freedom and independence.
According to the Freelancing in America survey, there is a reported 57 million American freelancers contributing an excess of $1 trillion dollars to the economy each year. Recent data shows more than 75% of freelancers are working independently by choice. Due to the accessibility of apps and sites like Upwork, Instacart and Uber, to name a few, people can work on terms they prefer and accept opportunities that feel right for them.
If freelancers are reclassified as employees, they’ll have to trade in their freedom for structure, potentially losing their ability to set their own hours. Of course, that’s only if the company chooses to continue the relationship and convert them into an employee. Lorena Gonzalez, author of Assembly Bill 5, insists the goal of this law is “to create new good jobs and a livable, sustainable wage job.” Supporters emphasize the benefits and protections gig workers will receive such as health care subsidies and a guaranteed $12 state minimum hourly wage, but fail to address the consequences of the new law.
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