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.
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.
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.
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.
Things were starting to get dicey in the Garden State as the legislature debated a California-like proposal that would have caused serious problems for gig economy companies and other businesses utilizing contract labor. But a measure of good news emerged last Friday as Senate leadership announced there would be changes to the draft legislation to protect a greater number of independent contractors. While we still cannot be sure about the extent of the changes and whether the resulting amendments will permit the typical gig economy company to continue business-as-usual, there is reason for optimism that the state will look to balance both the interests of workers and the needs of business when it comes to legislation in this area.
As we reported just a few weeks ago, Congress has begun to gather information and consider the “future of work,” with considerable emphasis on the role of the gig economy. Although this emergency economy is growing rapidly, tension is also growing within its ranks. In particular, gig workers are attracted to earning money while maintaining all the flexibility and control they can exercise in these arrangements. But they are not entirely comfortable with the concept of being an independent contractor (IC) if that means they have no fringe benefits, are not covered by the minimum wage, and have no protection from non-discrimination laws. In this way, and in a much truer sense, ICs are “on their own.”
Lawmakers have begun to hold a series of hearings to discuss the “future of work,” and it may be no surprise that the two political parties have differing ideas about how that should impact the gig economy. The House Education and Labor Committee held the first of three such meetings on October 23, aiming to ensure that the law keeps up with modern developments such as automation, artificial intelligence, and the gig economy. While Democratic lawmakers seem to want to increase restrictions on the industry, their Republican counterparts are looking toward more flexible options. According to an article by Jaclyn Diaz of Bloomberg Law, the working subcommittees will recommend specific legislation early next year. What might such legislation look like, and what chances of success might it have?