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New law could change the gig economy

The California Senate may be ruling on a new gig economy law in the coming weeks, according to a Sept. 9 report. The law, Assembly Bill 5, would reclassify many "gig" workers, also called independent contractors, as normal W-2 employees. If that happens, companies could be forced to pay out health benefits, overtime pay and workers' compensation among other benefits.

This issue is controversial for good reason. People who love it say that the bill will help reduce the risk of workers being taken advantage of by businesses who are misclassifying them as contractors to avoid paying benefits to them. Those who disagree with the bill say that the effect of the law could be that it puts many people out of work.

The new law creates a standard to determine if someone is an independent contractor by using the ABC test. People would only be able to be classified as independent contractors when:

  • They are free from the control or direction of the company while performing their work
  • They are hired as a business independent of the trade that they are being hired for
  • They perform a job that is outside the client firm's normal type of business

There are going to be exemptions, of course, and not everyone who has been an independent contractor in the past will suddenly become a W-2 worker. However, what this bill shows is that wage and hour violations, misclassifications and other violations are being taken seriously and will continue to move through the California State Senate. It's important to pay close attention to this in the future, especially if you believe you've been a victim of misclassification in the workplace.

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