INDEPENDENT CONTRACTOR LEGISLATION IN CALIFORNIA THREATENS GIG WORKERS

The California legislature has passed a bill that has been signed by its governor designed to reclassify many or most contract workers as employees.  The bill goes into effect January 1 of next year, and applies what is known as the "ABC Test" to employment status.  It requires companies that want to treat a worker as a contractor to prove that the worker is independent and free to perform the services provided without company control, that those services are outside the company's usual course of business, and that the contractor works independently in the same type of business as the contracted work.  The bill, known as Assembly Bill 5, directly threatens the business model of gig-economy companies like Uber, as would the legislation promoted by various Democratic Presidential candidates in Congress.  Further, the so-called "red" states across the country are looking at this bill and considering similar legislation.                     

The situation in California leaves many with the question as to what to do after the law goes into effect.  Federal Express reacted to similar issues by abandoning any issues of independent contractor drivers in favor of smaller independent motor carriers, and contracting with corporate entities rather than individuals seems to promote the contractor classification.  Although a company might also consider outsourcing employment to a staffing agency, issues still arise concerning potential joint employment liability.