The truck drivers were the first group to take aim at AB5 through a lawsuit, and the freelancers followed suit. Soon before the clock strikes midnight to ring in the new year, two giants of the gig economy fired their own shot. Uber and Postmates filed a federal lawsuit on December 30, hoping to overturn the controversial new law that will raise the bar to make it very difficult for the average gig economy company to classify their workers as independent contractors.
The clock is steadily ticking towards midnight on December 31, and once the illuminated cluster of grapes drops from the Temecula Civic Center clock tower (this is actually a thing) and rings in the new year in California, employers across the state – and across the country – will have to contend with California’s new independent contractor misclassification law which threatens to wreak havoc on the gig economy. Barring a legal miracle in the coming days, AB5 will officially become law, and the ABC test will be the law of the land. As businesses and contractors begin to grapple with this impending new reality, another group has filed suit in court hoping to upend the law before it takes effect.
While U.S. lawmakers grapple with the dynamics of the gig economy, our neighbor to the north is witnessing a dramatic increase in the number of gig workers. A recent article in the Toronto Star discussed a new study from Statistics Canada which “found a dramatic increase in gig workers.” Specifically, the study found that the number of gig workers in Canada “jumped by 70% between 2005 and 2016, from 1 million to 1.7 million — an increase from 5.5% of all workers aged 15 and older to 8.2%.” In Toronto, one in 10 workers obtained some of their income from the gig economy in 2016 according to the study.
In anticipation of New York’s 2020 legislative session, state lawmakers are beginning to develop a proposal to regulate the gig economy – and the news isn’t good for businesses. As we discussed in an entry back in September, New York seems intent on developing a law including California-like elements that might lead to a version of the ABC test in the Empire State. But recent news means we might see things get taken a massive step further. Some legislative leaders are also seeking to introduce the country’s first collective bargaining law that would permit gig workers to unionize.
The gig economy has created a seismic shift to the traditional workplace model. With new (and oftentimes inexperienced) workers performing dangerous tasks in a “faster is better” manner, workplace safety has the potential to fall through the cracks. While the Occupational Safety and Health Act does not currently provide protection to most individuals working in the gig economy – the OSH Act covers employers/employees, not independent contractors – many employee advocacy groups are calling for more safety protections.
The burgeoning gig economy helps companies attract talent and gain new levels of nimbleness in support of efforts to satisfy customers and gain an edge on the competition. The gig relationship is obviously attractive to many. It gives workers greater flexibility, with meaningful opportunities for those who are entrepreneurially inclined.
We reported last year about the importance of a new retirement system for the gig economy. Typical gig workers are currently not entitled to enjoy a traditional employer-based retirement plan because the law only permits such plans to cover employees and not independent contractors. But the need for gig workers to have opportunities to save for retirement has done nothing but increase in recent years. Research shows that there are 56.7 million freelancers in the United States and Congress has yet to pass legislation creating a retirement system for them.