CA legislature passes gig work bill, limiting contractor status

Mar 2012
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The Assembly on Wednesday passed “gig work” legislation that could send seismic changes across California’s employment landscape if passed by the Senate and signed by the governor.

Hundreds of thousands of independent contractors, ranging from Uber and Lyft drivers to manicurists, could become employees under AB5, which codifies a groundbreaking California Supreme Court decision known as Dynamex. The court decision and the bill both apply three-part criteria, called the ABC test, to determine whether a worker is an employee. To be a true independent contractor, it says, a worker must be free from a company’s control, doing work not central to the company’s business, and have an independent business in that trade.

The bill’s author, Assemblywoman Lorena Gonzalez, D-San Diego, said that companies often classify workers as independent contractors to duck laws governing minimum wage, overtime, workers’ comp, disability and other benefits. Many experts say reclassifying workers as employees can add 30% to a company’s labor expenses.

“This is a monumental victory for California’s working people,” said Steve Smith, a spokesman for the California Labor Federation. Organized labor strongly backed the bill, which has the potential to create new classes of employees who could become union members.

But many businesses large and small said the bill would devastate them, and some independent contractors said they feared loss of the flexibility that is key to their lives. “Small businesses rely heavily on third-party providers because they don’t have the wherewithal in many cases” to hire employees for some tasks, said Jack Frost, president of Pro-Small Biz California. “Independent contractors help create efficiencies and a profitable bottom line.”

California Assembly passes gig work bill, limiting contractor status
 
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