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Will new CA law kill your job and Gig Economy?

A controversial new law in California is widely referred to as protection for Uber and Lyft drivers in the “Gig Economy,” but it makes no references to ride-sharing services — and certainly isn’t limited to one industry.

 

California’s controversial labor bill has passed. Experts forecast more worker rights, higher prices for services

Source: usatoday.com

Gig Economy

A controversial piece of legislation passed the California Legislature late Tuesday evening, codifying and clarify a landmark state Supreme Court decision that limits whether companies can classify their workers as independent contractors.

Expected to have wide-reaching implications that resonate across the country — including posing an existential crisis for businesses built with independent, on-demand labor — the bill is now on its way to Gov. Gavin Newsom’s desk.

“This is one of the few times in recent history when so many people will be impacted by a single decision,” said Ryan Vet, an entrepreneur, and gig-economy expert who founded Boon, an on-demand health care platform. He said he sees positives and negatives in the new law, that is “good for the workers, but will also implode the gig economy as we know it today” with increased costs.

 

California Assembly Bill AB-5 will certainly trigger similar laws nationwide. The emphasis seems to be on the ride-sharing industry, but it affects everyone working as an “independent contractor” in any part of our economy.

What’s your take?

  • What jobs will AB-5 really affect?
  • How will it affect employers and consumers?
  • Is AB-5 a gift to third-party “contracting firms” that hire and rent Gig Economy workers to employers?
  • If this law is cloned in your state, how will it affect you?

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19 Comments
  1. I’m an engineer with a day job and all the benefits. I am also a professional musician (I have degrees in both fields). Musicians by definition do “gigs.” As my major instrument is the pipe organ, I have been employed by different churches throughout the years and given organ recitals. The church jobs were either a permanent (every Sunday) type of thing – one job I had was as a full-time music director in a very large church.

    At this point in my life I get called to perform at churches that still have pipe organs and play for a service on a Sunday when the regular organist is out of town. I receive a payment for this. I practice on my own time, but I have to be there for the performance.

    So how will this disrupt both musicians and actors who do gig work? As for me, I don’t need the money, but it’s nice to get paid. Also, when I am on the premises, if I have an accident I am sure I would be covered, gig or not.

    • The question is, would you dislike being stopped from playing the organ for these churches?

      You may say you would be willing to play for free, but there are some places that are also looking to regulate charity work and insist that people providing charity for organizations also must be paid. Combining a regulation like that with California’s new regulation results in a world where everyone MUST be an employee for nearly every activity the take part in. (I wouldn’t be surprised if California also tried to add that regulation to cut off people in the gig economy who love what they do so much they’d do it for free to avoid running afoul of this new law.)

      All in all this new regulation from California will be a DISASTER, likely in more ways than we can possibly imagine.

    • I read elsewhere that the bill exempts gig workers in the arts. Musicians and actors should not be affected.

    • If it is anything like the result from the UK a couple of years ago then the solution is easy. Either a) treat as actual self employed (can set own hours,provide substitutes at own expense, choose and provide their own tools etc and change contracts to reflect that

      Or

      B) gig economy companies can pay minimum wage and other benefits and rise prices accordingly.

      Uber went with B), still widespread although taxis and hired caba can be more popular at surge times now as a result.

      In fact more drivers are intrested due to the higher income potential.

      Forcing uber to pay fairly puts other companies and genuine contractors on a fair playing field.

  2. Any so-called gig work that I do as a musician is strictly on the side and it’s money that is nice to have. Orchestral musicians for small towns like mine (Santa Barbara, CA and previously Dayton, OH have orchestras that are all part time gig musicians – the Indianapolis Symphony and Los Angeles Philharmonic are full-time orchestras – so there is no gig problem).

    I think the legalities will have to be worked out, but remember, the target is for full-time jobs that are treated as free-lance. It is targeted to people trying to game the system.

    Remember, the spirit of the law is the driving force behind it.

    If I were a business that depended on full-time gigs, I would be scared.

    • The problem is that I would guess that a good number of the people who work for Uber and Lyft are doing it supplementally and part time. I think this law will make it more likely that they’ll walk away because of the hassle of being treated like an employee when all you wanted was some easy side money.

      I think it will be so dramatic that Lyft and Uber availability in California will drop substantially.

      • @J: Remember that California is the fifth largest economy in the world. Up until recently, it was the sixth largest economy. This can only mean one thing: California is growing from an economic standpoint (and I am well aware of the poor parts of the state, and I see homeless people every day).

        I am to conclude, therefore, that ride sharing services will find a way to adapt to the new law. I am an engineer, and I ask “How can it be done?” rather than “Can it be done?”

        The main difference is that drivers of ride sharing services would be employees of some entity that would take care of taxes and benefits as well as paying them. For example, I work for a very large company with an international presence – people who retire and work either part-time or on-call for us become employees of a designated consulting firm who takes care of pay and benefits, and then we pay that firm.

        Don’t forget, a person can still found a company of their own and become that company’s first employee. There are ways of dealing with this.

        Rather than saying how bad this is I would suggest finding solutions.

        • I get what you’re saying about working around damage (a la the internet) and finding new solutions. But it shouldn’t be a given that regulation is “right” and that it should always be something that should be worked around to solve solutions.

          I do not live in California, I live in a rural state and am looking at this law in that context.

          Formerly on this blog I got into a heated argument with our host here about a federal $15 national minimum wage (which would devastate the economy in my state).

          California can do what California does, but I am sick to death of California implementing rules and then pushing other states or the whole nation to follow their rules. We are a nation of what should be independent states and not a nation of states that are to be made to follow California’s and New York’s lead.

          The question to ask is “is this regulation necessary?” and in my opinion it was not necessary. You can be creative and find solutions to the law and that’s all fine and good, but that does not mean that regulation is better than having something not being regulated and allowing the full scope of free trade and interchange of people to come up with new ways of doing things.

          • Agree with you

          • >Formerly on this blog I got into a heated argument with our host here about a federal $15 national minimum wage (which would devastate the economy in my state).

            As I understand it $15 could be too high in parts of California and too low im Silicon valley/san Francisco.

            You might need a higher wage in the state capital (effectively a cap on number of residents and a push out of jobs into the countryside)

            >The question to ask is “is this regulation necessary?” and in my opinion it was not necessary.

            As I understand it,the regulation is only neccesary if enforcement of existing ones are lax or allpw loopholes. I’m not afait enough with American laws to tell which is the case here.

            • I disagree that a $15 minimum wage will be a disaster, but if we wait long enough, inflation will make it too small a number!

              I think having less of a minimum wage is a disaster to our economy. Originally when there was a minimum wage, one could at least subsist on that – today, such a minimum wage will not even give you basic housing in inexpensive areas of our country.

              If you pay people a decent wage or salary, they will in turn spend the money on the economy. As it is, people earning minimum wage are having to often depend on government benefits.

              Actually, I think we need a standard calculation for a minimum wage. I am not sure what should go into the calculation.

              Finally, a just minimum wage is the right thing to do – it is a travesty that we live in the richest country in the world and so many people can’t afford homes, health care, nor food.

              It’s already a disaster, and it’s getting worse.

              PS: I am in the very beginning stages of starting a business – the market research stage is where I am currently, and it will be awhile before I start making money. My intent is to pay people decently (although my employees will typically have college degrees).

  3. >The main difference is that drivers of ride sharing services would be employees of some entity that would take care of taxes and benefits as well as paying them

    Like say uber

    • Somehow I don’t really see Uber/Lyft jumping on that. Their whole model is predicated on the use of independent contractors.

      • >Somehow I don’t really see Uber/Lyft jumping on that.

        It took court orders and law enforcement in in the UK

        >Their whole model is predicated on the use of independent contractors.

        Yet, they never withdrew from the UK or changed their approach when the courts ruled drivers were not independent contractors. If it was essential and no longer allowes,why didn’t they leave the market like they did with Germany?

        It is essential to them paying less tax and less money to drivers.

        https://www.independent.co.uk/news/business/news/uber-drivers-workers-rights-case-court-of-appeal-gig-economy-ruling-a8691026.html?amp

        They could have changed the contracts to allow drivers to arrange their own substituon,choose their own vehicles and the like if they needed contractors,but they choose to accept the classification and now have to pay minimum wage.

        • Well, I can’t really speak to European employment law, but in the US, the status “independent contractor” essentially allows Uber to wash their hands of responsibility and say, “Hey, we’re just a tech company that matches drivers and riders.” There is no motivation for them to use an employer-employee model.

          Even regular taxi companies use the independent contractor model, so nothing new there. Switching to employer-employee model and being subject to minimum wage laws doesn’t make sense, and would kill these types of businesses.

  4. >but in the US, the status “independent contractor” essentially allows Uber to wash their hands of responsibility and say, “Hey, we’re just a tech company that matches drivers and riders.”

    That’s true here if they genuinely are independent contractors,it’s based on the facts rather than what they say.

    >Even regular taxi companies use the independent contractor model, so nothing new there.

    What’s new is lack of independent contractor rights, which regular taxi companies here either give or make staff employees.

    A lot of these gig companies insist on their gig workers being treated like employees in terms of control but like contractors in terms of pay,benefits and taxes. It is whatever suits them.

    >Switching to employer-employee model and being subject to minimum wage laws doesn’t make sense, and would kill these types of businesses.

    Then why are they on that model where our minimum wage is roughly equivalent to $10.24 per hour? They should have died out by now.

    Besides even if that were true, they could just switch to the genuine contractor model.

    >There is no motivation for them to use an employer-employee model.

    This is why laws and enforcement are important,there is no motivation foe them to pay their taxes either,so companies that don’t are made to suffer.

    By the way this UK law is actually transposed into an EU directive coming in a couple of years,so I bet on a massive increase on ubers losses soon.

  5. The most terrifying words in the English language are: I’m from the government and I’m here to help.

    Ronald Reagan

  6. I’m surprised no one has brought up the effects of this law on “consulting firms” — those third-party businesses that actual employers (e.g., Microsoft, J&J, etc. — not to call them out specifically for any reason) turn to.

    As more “gig workers” are deemed “not really independent contractors,” it seems to me that it’s the consulting firms that will profit — because the actual employers of those contractors will have to engage a middle-man to “hire” such workers in order to avoid being in violation.

    If I were running a consulting shop, I’d be lobbying for this law in MY state!

    But is that good for workers?

    Is it good for the economy?

    My take: https://www.asktheheadhunter.com/10569/consulting-cluster-fck-economy

  7. On the face of it,this does seem fair to the other employers who are “correctly hiring” and no longer facing the lower cost competiton and fair to the “gig workers” who get extra rights.

    Of course the other way to go is just to let any employee be reclassified as a contractor but that lowers tax receipts.

    I bet the taxi drivers would be lobbying for it too,right next to the consulting firms.

    In the UK since the ’60s employment businesses and temp agencies have been filling this middle man role,for those companies who wish to avoid employment law, have greater control over workers than they would with a true contractor and are willing to pay a premium for the privilege.

    No different to outsourcing say IT or the bookkeeping really.

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