Controversial ‘Gig Economy’ Law Takes Effect In 2020
Sonora, CA – The so-called California “gig economy” law was passed in September and remains very controversial as it now faces a lawsuit and possible referendum on the 2020 election ballot pushed by ride-sharing companies like Uber and Lyft.
The new law takes effect next week and makes it harder for companies to treat workers as independent contractors. It includes tough restrictions on who can be considered independent contractors or freelancers rather than employees. Workers can only be classified as independent contractors if companies don’t have the right to control their work and how it is done.
A number of factors go into determining that, such as, how closely a worker is supervised and who sets their hours. The work being done must not be part of the company’s regular business, and the worker’s occupation must be distinct from the company’s; in other words, a graphic designer cannot be an independent contractor for a graphic design firm.
There are some exemptions including doctors, lawyers, architects, insurance brokers, graphic artists barber shops, hair and nail salons, and spas but they must have the freedom to set their own hours, negotiate their own fees and exercise their own judgment as they do their jobs. The latter must choose their own clients and be paid directly by the clients.
Supporters argue the new law addresses inequities created by the growth of the gig economy, including the employment practices of ride-sharing companies like Uber and Lyft that use contractors. Independent contractors and freelancers have long been a sore point for federal and state officials who contend that many of these workers are doing work that employees do. Contractors cost less as they do not have to be paid the minimum wage or get health insurance, 401(k) contributions and other benefits.
Although the law affects companies of all sizes and out-of-state businesses that use California contractors, it likely will have a greater impact on the many small businesses that have hired independent contractors because of limited staffing budgets. The gig economy allows owners to hire these workers for short periods or on special jobs; saving actual employee jobs. A staunch opponent of the law, Mother Lode State Senator Andreas Borgeas, decries that the law will destroy industries, as reported here.
There is one alternative allowed in the law for these workers and that is to start their own business. Companies that don’t comply with the law face the possibility of penalties running into the tens or hundreds of thousands of dollars. Workers can also bring lawsuits against companies.
Even though the new law begins January 1st it is facing several challenges. Those include lawsuits at the state level, as well as a push for a possible referendum on the 2020 election ballot on whether these workers should be exempt from the law, which is being initiated by companies including Uber and Lyft.