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?
San Francisco ratcheted up the pressure on California gig economy companies by not only filing a misclassification lawsuit against DoorDash, but promising that more such litigation was to come against other companies. Upon filing the June 16 unfair business practices lawsuit – which appears to be the first instance where a California District Attorney has taken such an action – the San Francisco District Attorney said, “I assure you that this is just the first step among many steps that our office will take…” What do gig economy companies need to know about this latest troubling 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.
A federal court judge in Massachusetts just rejected Lyft’s attempt to escape the reach of Prong B of the ABC Test, indicating it was “likely” that its rideshare drivers are employees and not independent contractors. The news wasn’t great for Lyft, but more importantly, the May 22 decision doesn’t portend well for gig economy companies trying to fit their traditional business model into the strict confines of the ABC Test. For those operating in states where misclassification conflicts are resolved using the test – we’re looking at you, California – this development isn’t the best news, and is definitely worth tracking.
Not so long ago – 2019, to be exact – in a state not so far, far away – California – lawmakers passed the nation’s most controversial misclassification law to sweep as many independent contractors into employee status as possible. By now, most businesses recognize that AB-5 is the dreaded state statute that codified the “ABC test” across California and not the name of a new protocol droid. And most companies that have independent contractors in the state, especially gig economy companies, are quite familiar with how far-reaching the statute is. But is it so sweeping in nature that it would snare the Mandalorian, one of the Star Wars universe’s newest heroes, in its grasp? This May 4th, we’ll explore this question together.
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.