If You Make Money Through an App, You Might Want to Pay Attention to This Bill

AB 5 could upend the gig economy in California
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What do rideshare drivers, freelancers, and exotic dancers have in common? They’re all contract workers, which means they could all be impacted by AB 5, a groundbreaking labor bill that’s making its way through the state Senate. Passed by the Assembly last week, the measure would redefine what it means to be an employee in California, extending labor protections and benefits like health care, overtime, and minimum wage to many workers formerly labeled as independent contractors. Here’s what you need to know about the bill’s background, whom it would affect, and why it might mean the gig is (literally) up in California for app-based companies like Uber and Lyft.

It all started with a court battle last year. AB 5’s legal precedent was a 2018 state Supreme Court case involving delivery company Dynamex Operations West. In the case, contract workers at Dynamex argued that because they were required to do things like wear company uniforms and shoulder vehicle costs, they should enjoy the benefits of regular employees. The court ruled unanimously in their favor, coining a procedure called the “ABC” test to help classify workers in future cases.

Assembly Bill 5 would codify that test. If passed, the bill would make “ABC” the standard for determining employment status in California. The three-part gauge mandates that a worker can only be considered a contractor if they are:

  1. Free from the “control and direction” of the company they’re working for.
  2. Performing work that is “outside the course” of the company’s usual business.
  3. And have their own independently established trade, occupation, or business.

This is far stricter then the current federal determinations for employment status, and would apply to a wide variety of industries. A sizable list of occupations—including doctors, architects, engineers, and independent hair stylists—would be excluded.

 

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App-based employers would have to make some of the biggest changes. Apps like Uber, Lyft, Postmates, and Wag have business models that rely heavily on cutting costs by using independent contractors—a good chunk of their profit margin is made possible because employees take on costs like car maintenance fees and aren’t entitled to benefits like sick time or workers’ comp. Rideshare drivers for years have been fighting for better treatment from the companies, most recently with a series of worldwide strikes.

If this bill were passed, these “gig economy” heavy hitters would have to start shelling out for employee benefits, which would likely destabilize their business models. This could explain why in recent years that Uber has agreed to settle several multimillion-dollar lawsuits accusing the company of employee misclassification, under the condition that it could keep classifying its workers as freelancers.

Many other industries would be affected, too. In recent years an increasing number of companies have relied on private contractors to drive profits in a strapped labor market; today nearly 36 percent of America’s workforce is classified as freelance. Last year contract workers outnumbered direct employees at Google, a trend that is widespread in tech. As media companies have implemented mass layoffs, “full-time freelance” positions that require a 40-hour workweek but lack benefits have become commonplace at magazines, newspapers, and websites. Exotic dancers (who recently launched a labor movement in the wake of the Dynamex ruling), truck drivers, and manicurists are among other careers that could be affected by AB 5.

Even if the bill passes, freelancing (by choice) will still exist. On social media, some have expressed concerns that this bill would make working more difficult for those who prefer to be independent contractors. Lorena González, the San Diego Assembly member who authored AB 5, says she’s working to make sure that is not the case. The point, she says, is to protect workers from exploitation and to classify them as real employees with the power to unionize, not to stifle their independence. “We don’t want to deny somebody the opportunity to, say, submit a story to The New York Times,” she says. “So we are looking at freelancers and working with some of the associations and unions to come up with a definition for what a ‘real’ freelancer is.”


RELATED: Frustrated L.A. Rideshare Drivers Protest Uber’s Latest Painful Pay Cut


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