Last week’s successful effort by California’s Attorney General to obtain an injunction forcing two ride-sharing giants to reclassify their drivers as employees may be the beginning of a trend that threatens to create a new normal for gig economy companies. Days later, the local district attorney in San Francisco filed a similar request in court seeking to force DoorDash’s independent contractors to be classified as employees. What does this August 12 move signal? Essentially, if you operate in a jurisdiction like California that has adopted the ABC test for determining worker status, you could be the next target of a government-initiated lawsuit that would aim to upend the very business model you have created.
A report by Ben Penn in Thursday’s Bloomberg Law casts serious doubt about whether the Department of Labor will proceed with a misclassification rule before the end of this presidential term. We reported last month that the July 1 regulatory notice issued by the DOL announcing an impending regulation for determining independent contractor status under federal wage and hour law was good news for gig economy companies. Such a rule would almost certainly provide a flexible standard permitting typical gig economy businesses to classify their workers as contractors under federal law. And the cherry on top was the news (also broken by Ben Penn at Bloomberg) that the agency was aiming to fast-track the rule to be completed by year’s end, insulating it from the possibility that a new administration voted into the White House this Election Day could quickly reverse course. But yesterday’s news casts a pall over this hopefulness and brings gig economy companies back to earth with the realization that we may not see such a proposed rule anytime soon.
In an op-ed appearing in today’s N.Y. Times, Uber CEO Dara Khosrowshahi echoes what we have been saying on this blog for quite some time – that it is time for federal and state lawmakers to tear down the existing regulatory structure forcing companies to select one of two binary choices for their workers, labeling them as either employees or contractors. He advocates for a “third way,” which would permit workers to retain the flexibility they crave while being eligible for benefits provided by the hiring entities they work with.
The formal regulatory notice released yesterday is so short and sterile that the average gig economy business could be forgiven for ignoring it: “The Department of Labor is proposing a regulation for determining independent contractor status under the Fair Labor Standards Act.” But the implications are immense. Given the manner in which the current administration has treated the misclassification question, yesterday’s announcement seems to be a signal that we will soon see a federal regulation that will provide a flexible standard permitting typical gig economy businesses to classify their workers as contractors under federal law.
In a budget deal finalized today and expected to be approved by state lawmakers in a matter of days, the California state legislature has reached an agreement that will see $17.5 million allocated toward enforcement of AB-5 in the 2020-2021 budget year. Unless the state law is radically revamped by voters through a November ballot measure, gig economy businesses can expect to be under the regulatory microscope by state enforcement officials for the foreseeable future. What can gig economy businesses expect given this development?
Gig economy workers performing food delivery services in Seattle will receive an extra $2.50 per delivery during the COVID-19 pandemic thanks to a first-in-the-nation hazard pay law unanimously passed by the City Council on Monday. The bill now heads to Mayor Jenny Durkan’s desk; she has indicated she will sign it into law this week. What do gig economy businesses need to know about this groundbreaking development?
I was able to virtually attend a session of Albany Law School’s 2020 Warren M. Anderson Legislative Seminar Series last week on “The Gig Economy,” bringing together some of the nation’s foremost thought leaders on the subject for a lively and informative panel. A recording of the May 28 hour-long session can be found here and is available for free. (Many thanks to Albany Law School for the invitation and for allowing us to share the link here.) I teamed up with Richard Rifkin, Legal Director, Government Law Center – who hosted the event – to develop this summary.
Following a proposed and failed bill in the New York State legislature during Summer 2019 that would have created a new category of “Dependent Worker,” and California’s passage of AB-5, which codified the ABC “employment” test into law, all signs pointed to 2020 being the year that New York instituted a sea change to the definition of independent contractor.
Over a million Californians have said they want a chance to vote on the misclassification law that threatens to upend the gig economy as we know it – and that means that their wish will soon be granted. Thanks to a signature-collecting effort that has already far surpassed the necessary 623,000 signatures needed to place a measure on the ballot, voters in California will have the opportunity to pass a law this November that will exempt certain gig economy workers from the reach of the ABC test and instead ensure they are classified as independent contractors. The ballot measure, known as the “Protect App-Based Drivers & Services Act,” would see typical app-based drivers established as contractors regardless of AB 5 or the findings of state regulators if voters agree. Gig economy companies in California – and their workers – are now one step closer to regaining the independence and freedom that separated them from the business-as-usual world to begin with.
A New Jersey lawmaker recently took a big step towards creating a system of benefits for gig economy workers. New Jersey State Senator Troy Singletary introduced Senate Bill 943 which, if enacted, would “establish a system for portable benefits for workers who provide services to consumers through contracting agents” in the state.