How a New Law Could Reclassify Many Independent Contractors as Employees

How a New Law Could Reclassify Many Independent Contractors as Employees
Oct 02, 2019

The ubiquity of technology in American society ushered in a new type of work: the gig economy. Headlined by high-profile start-ups, these companies promised potential workers job flexibility and fair pay.

As those gig economy businesses became more entrenched, however, worker advocacy groups began sounding the alarm, decrying their business practices as exploitative. In California, a new law is aimed at addressing one of the major concerns: misclassification.

Are Gig Workers Independent Contractors or Employees?

At the heart of this issue is a question about worker classification. Uber and Lyft, for example, have argued the people that choose to drive for them are independent contractors – not employees. By classifying these workers as independent contractors, it means these companies do not have to offer workers certain benefits and protections outlined in federal law, a Vox report explains. That includes not being required to:

  • Offer benefits
  • Pay overtime
  • Follow certain minimum wage laws
  • Pay some taxes

In addition, independent contractors can not form a labor union.

If companies were required to classify these gig economy workers as employees, however, it means those workers would gain those benefits and protections. Some gig companies do not want this, as it will cost them more money.

California is attempting to force their hand.

California’s New Contract Workers Law

In September of 2019, California’s governor signed into law a bill that would result in many of California’s gig economy workers being reclassified as employees. The law includes an “ABC test” for determining whether a worker is an independent contractor or an employee.

One report estimates about 1 million current gig workers could become employees under this ABC test, leading to those people earning benefits and protections that had previously been off-limits.

While drivers have been much of the focus, the law applies to most industries. There are a few exceptions however, including for doctors, lawyers, certain types of truckers and newspaper carriers.

The law is set to go into effect in 2020.

Intentional worker misclassification is a serious issue, one that robs workers of benefits and pay they should be receiving. If you believe a business misclassified you as a way to flout labor laws, you can consider filing a complaint. You may also be able to pursue legal action to recoup what you were denied, particularly if the company retaliates against you.

Employment laws are complex. That should not stop workers from being paid what they are rightfully owed.

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