On September 10, the California State Senate passed Assembly Bill 5. It now awaits Governor Gavin Newsom’s signature, who has already expressed support for the bill. He believes continuing to classify gig workers as independent contractors could lead to greater income inequalities.
Assembly Bill 5 has the potential to seriously impact companies and workers in the gig economy. BBC News reports the governor signing the bill into place would affect the one million gig workers in California. According to Capital Public Radio, 222,000 of these workers drive for Uber and Lyft. The bill stems from a 2018 California Supreme court ruling stating workers essential to the company are employees. The decision also states employees work under the company’s control and lack personal agency and freedom.
What does gig economy mean?
The gig economy is when companies, such as Uber, DoorDash and Lyft hire on-demand workers and classify them as part-time or independent contractors. If they give their workers contractor status, they can save money by not offering them benefits.
What are employee benefits?
Working as an employee comes with many advantages and benefits not offered to independent contractors including:
- Minimum wage
- Paid sick days
- Health insurance
- Unemployment eligibility
Assembly Bill 5 questions where to draw the legal line between employees and contractors. It also considers whether independent contractors should be eligible for benefits. The overall attention given to this bill demonstrates how it could influence the whole country.
Employers, especially in the gig industry, must know how to categorize their workers to avoid any other potential issues, such as wage and hour disputes, caused by inaccurately classifying workers. Conversely, workers may feel they’ve been misclassified.
Assembly Bill 5 doesn’t apply to all industries with independent contractors. So, guidance in navigating this bill could help one determine how it would impact them or their company.