A federal court judge today denied a request by several gig economy giants (and a few contractors) to block AB-5, the new misclassification law in California that codifies the ABC test and makes it much more difficult to classify workers as independent contractors. That means that gig economy companies across the state have no immediate avenues to escape the grasp of the ABC test, which became state law on January 1. If you were waiting to determine whether to make any adjustments to your business model in the hopes that the law wouldn’t apply to your business, the time is now to give your attention to compliance solutions. While you can still hold out hope that there will be a legislative fix, or an eventual court ruling in businesses’ favor, or an election-day ballot measure that would solve many problems, these potential solutions have uncertain futures and are not on the immediate horizon – so you shouldn’t hold your breath.
A gig economy business just prevailed in the first round of a misclassification legal battle worth keeping your eye on. A state court judge in California rejected San Diego’s effort to use the state’s unfair competition law to force Instacart to immediately reclassify its gig workforce as employees, denying a request for a temporary restraining order (TRO) on February 4 and handing a victory to gig economy businesses across the state. But the battle is far from over. The city attorney’s office will continue to pursue litigation against Instacart using the state unfair competition statute. If the government wins, we could see other officials use this dangerous weapon against gig economy companies throughout California.
New Jersey businesses will now face an increased slate of potential penalties for misclassification violations thanks to a series of bills just signed into effect by Governor Phil Murphy, but gig economy companies can breathe a sigh of relief because lawmakers declined to adopt a large-scale misclassification California-like law that could have seen tens of thousands workers classified as employees instead of contractors. The six bills signed into effect last week emerged from a worker misclassification task force, but thanks in part to the controversy that has plagued California’s AB-5 – which codified the infamous ABC test and has caused countless headaches in workers and businesses alike – the state decided not to pursue a proposal that would have approached that same territory. But the reprieve may only be temporary: lawmakers and worker advocates alike are already heard at work in the 2020 legislative session to pass a modified ABC test that would upend the current classification structure.
Universities have often offered courses teaching students how to navigate the workplace and manage their careers. Now, we’re starting to see some of these courses focus on teaching students how to best participate in the gig economy.
The federal court that had granted a temporary restraining order on New Year’s Eve blocking California’s misclassification law from taking effect against the trucking industry just extended that ruling by granting a preliminary injunction which will block AB-5 as to truckers for the foreseeable future. It’s a big win for the trucking industry in the state, and it keeps alive the hope that the ABC test will never be applied for those California businesses – and truck drivers – in the motor carrier field. But of course, we continue to wait for the other shoe to drop: will a court also block AB-5 when it comes to gig economy companies?
Yesterday saw a state court conclude that California’s controversial new misclassification law doesn’t apply to truck drivers, the second time in the last few weeks that a judge has come down hard on AB-5 for going too far in limiting the kinds of workers who can be classified as independent contractors. While any decision limiting the reach of AB-5 should be welcomed by the business community, we’re still on pins and needles waiting to see if a court will take a big step and block the law altogether, or at least even as it applies to typical gig economy workers.
This blog is littered with posts talking about the various states that are intent on creating a California-like legal test that would make it supremely challenging to classify workers as independent contractors. We’ve done several on New York alone, and that state’s efforts to adopt the ABC Test for themselves, just like California did with AB-5. And we’ve covered New Jersey. Meanwhile, Illinois, Wisconsin, Oregon, and Washington all seem like they might be the next California copycat.
As readers of this blog know, three separate groups have filed lawsuits seeking to block or overturn California’s AB-5, the new law that raises the bar to make it very difficult for businesses to classify workers as independent contractors: truck drivers, freelancers, and gig economy companies. Although the truck drivers were successful in winning a temporary reprieve from the law, the freelancers’ group just received bad news that could also spell trouble for gig economy companies. A federal court denied their request for a temporary restraining order that would have blocked the law from taking effect against them, and given the similarities between their arguments and the arguments presented by gig economy businesses, we may have just received a sneak preview into how the court will rule on the case we care about the most.
As the gig economy surges, on-demand workers are popping up in wider variety of industries. Trends indicate that the proportion of the U.S. workforce engaging in some form of gig arrangement will continue to increase, rising from the over one-third who are already participating. It is therefore no wonder that one of the largest slices of the nation’s economy – healthcare – is attracting more gig workers. In fact, this concept is not entirely new. Many healthcare employers have historically offered gig-like classifications and systems to help them retain a cadre of employed nurses and other professionals. Questions remain about the extent to which actual gig relationships can be effective in this vast industry.
A federal judge took a pause from his New Year’s Eve revelries to hand a big victory to California truckers, blocking the state’s new misclassification law from impacting them before the January 1 effective date arrived. While this maneuver doesn’t directly help gig economy companies in the state – who became subject to AB-5’s ABC test immediately upon the stroke of midnight – it could be a sign of good things to come.