Gig economy company Instacart lost the latest round of its misclassification battle in San Diego yesterday, as a California state court judge granted a preliminary injunction forcing it to reclassify its independent contractor workers as employees. But the judge took some of the sting out of the ruling by putting on hold any enforcement efforts by the city, allowing this “lively area of the law” to work itself out a bit more before dropping the hammer on the company. The February 24 ruling is the latest example of the ABC Test in action, demonstrating just how disastrous it could be to the traditional gig economy model and just how far it can be taken by aggressive government officials.
My colleague Todd Lyon wrote an excellent piece earlier this week about the House of Representatives passing the PRO Act, essentially a “wish list” for labor advocates seeking to tip the scales back towards unions. One of the items tucked away in that long laundry list of provisions that would come to pass should this bill become law: the notorious ABC test would be put into place across the country. Currently restricted to just a handful for states (most infamously, California), this test would become the law of the land if the House has its way.
CareerSource Florida, a government agency serving the state of Florida, recently released a report highlighting the growth of the gig economy in the state and emphasizing the positive impact it has had on the state’s economy. “The Study on the Gig Economy and Florida’s Workforce System” details information about the size and impact of the gig economy on the nation’s third-largest state.
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.