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Posts tagged Misclassification.

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.

After reviewing the 2,203 pieces of proposed legislation introduced in the California legislature by the February 21 deadline, it’s obvious that one issue will dominate debate in the 2020 session: the continued fallout from AB 5, the 2019 bill that codified and expanded the ABC test for determining independent contractor status. In fact, 34 separate pieces of proposed legislation that seek to modify or repeal AB 5, create new exemptions, or otherwise address the misclassification questions raised by the new law were introduced before the recent bill deadline. Let’s take a look at some of the key issues and the more prominent pieces of legislation.

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.

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.

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.

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