HR News: Gig Economy Could Go Extinct In CA

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Gig Economy Could Go Extinct In CA_Senior man with camera in city

Gig economy companies in California are fighting back against a new law they say could effectively end their companies.

Uber, Lyft and DoorDash have announced a ballot measure that would exempt them from AB-5, a bill signed into law by Governor Gavin Newsom.  When it takes effect on January 1, 2020 AB-5 will require these companies and others employing contract workers, such as janitors, nail salon workers and construction workers, to pass an ‘ABC’ test.  Under the test, the companies must prove these “contract workers are free from company control, perform work that is outside the usual course of business for the company and have independently established businesses providing similar work, in order to be classified as such.” (CNN

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Gig Economy Under Attack

Why does this matter?

Gig companies have largely built their model around the contract worker.  As such, these types of companies aren’t obliged to offer these workers the same rights and benefits employees are offered.  Those include a minimum wage and paid overtime.  Other benefits include workers’ compensation and paid sick leave.  Of course, benefits of contracting as a worker for a gig company typically means the contractor can set his or her own schedule allowing for flexibility, a very attractive benefit.  Gig companies say AB-5 could end that practice.

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DoorDash, Uber and Lyft also say AB-5 will hit them hard financially.  Having to rely on employees versus contract workers will potentially raise their costs by 20 to 30 percent.

The ballot measure, called the Protect App-Based Drivers & Services Act, won’t just exempt the companies.  They’ve also offered to guarantee drivers 20% more than minimum wage plus 30 cents per mile for expenses.  Those include gas and wear and tear on the drivers’ vehicles.  Additionally, drivers would get a health stipend, but it is dependent upon the driver working 15 hours during the week.  It’s increased when the person works 25 hours a week.

Voters are likely to get a chance to vote on the ballot measure in November of 2020.

Influence Spreads

AB-5 is already influencing other states too.  In fact, The New York Times is reporting labor groups in New York are supporting similar legislation.  Oregon and Washington State had similar bills, but they failed to make much headway in their respective state legislatures, but with AB-5’s success there is some suggestion this will renew a call for legislation in those states and others.

The federal government has also taken an interest in the gig economy, indeed the entirety of the future of work.  Earlier this month, the U.S. House Education and Labor Committee held the first of three meetings designed to make sure laws keep up with the changing workplace.  In addition to the gig economy, the focus has also been on automation and artificial intelligence.  Specific legislation on these topics are expected to be introduced in early 2020.

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AB-5 is also said to be the inspiration for Protecting the Right to Organize Act.  This bill, introduced into Congress earlier this year by Virginia Democratic Representative Bobby Scott, would “expand the definition of ‘employee’ and "employer" to discourage the classification of workers as independent contractors. It includes language that mirrors the three-pronged "ABC" test in AB-5 to determine independent contractor status.”

The Future of the Gig Economy

Will the gig economy go away as a result of AB-5 or other pieces of legislation?  No.  It won’t go away, but it will be required to change.  As was stated earlier, one of the things that makes the gig economy so attractive to workers is the amount of flexibility it offers.  With the changes coming to the laws governing contract workers, gig companies are going to have to rely on their own flexibility to help shape what the future of work looks like in the years to come.

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