You might have heard people asking things like “Is the gig economy the future of work?”, “Will the number of freelancers increase at a more rapid pace?”, or something similar. These people may have spoken a lot about the new law in California, too. The reason is that the California Assembly Bill 5 (AB5) affects a large number of gig workers and freelancers, mainly in California. Despite the fact that it has no impact on your life right now, you should know about it because some people expect to see similar laws adopted in other states in the US.

Get informed about AB5!

  1. What is AB5?

  2. Who should be concerned about AB5?

  3. How does AB5 affect freelancers and gig workers?

  4. What are some of the advantages and disadvantages of the new law?

  5. Stay updated!

California Assembly Bill 5
Change is coming in California, and maybe in some other states too, as AB5 might have a ripple effect.
Photo by Ross Findon on Unsplash.

1. What is the AB5?

Assemblymember Lorena Gonzalez had authored the California Assembly Bill 5 that was signed into law by Governor Gavin Newsom in September 2019. The bill has been crafted to prevent companies from misclassifying workers as independent contractors instead of employees. Under the new law, companies need to do a so-called ABC Test to determine whether they should classify people working with them as employees or independent contractors.

These are the conditions one must meet to be classified as an independent contractor:

  • A. That the worker is free from the control and direction of the hiring entity in performing the work, both in the contract for performance and in fact.
  • B. That the worker performs work that is outside of the usual course of the hiring entity’s business.
  • C. That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

2. Who should be concerned about the AB5?

AB5 applies to companies and workers based in California. Yet you must keep in mind that Illinois and New Jersey have passed similar legislation. There are also plans sketched out in the state of New York to protect gig workers.

California Assembly Bill 5
The film industry is also affected by the new law in California.
Photo by Ahmet Yalçınkaya on Unsplash.

Photo by Ahmet Yalçınkaya on Unsplash

3. How does AB5 affect freelancers and gig workers?

Although the new law took effect on January 1, 2020, it doesn’t mean that everyone can see the consequences of it already. And while the bill came about to provide more protection for people currently working as independent contractors in the gig economy, not only ‘gig workers’ are affected. Other professionals, among them translators, interpreters, and journalists, raised their voices about how the new law may affect them. For example, freelance writers, editors, newspaper cartoonists as well as photojournalists and photographers are now limited to 35 submissions per year to the same company. Despite the 35 submissions allowed, some California-based freelancers say they’ve been passed on by companies probably as the result of the new law. Vox Media has said bye to a large number of freelancers working for them, and now they intend to hire full-time part-time employees instead.

Some groups have already been organized to either discuss the new law with legislators or file lawsuits. In addition to this, Uber, Lyft, DoorDash, Postmates, and Instacart are planning to collect signatures to add the Protect App-Based Drivers and Services Act to the November 2020 ballot. They need 650,000 verified signatures. Uber and Lyft have also stated that they could pass the stricter test.

It’s important to know that NOT EVERYONE is affected by this new law. Doctors, lawyers, architects, engineers, accountants, insurance agents, realtors, hairstylists, financial brokers, dentists, podiatrists, psychologists, travel agents, payment processing agents, commercial fishermen, marketing professionals, graphic designers, grant writers and fine artists are exempt from AB5.

Read also:

California Assembly Bill 5
Write a pros and cons list to find out which option is better for you: being an employee or an independent contractor.
Photo by Glenn Carstens-Peters on Unsplash.

4. What are some of the advantages and disadvantages of the new law?

It depends on whom you ask as the bill affects workers differently. For example, not every freelance journalist or driver/delivery driver wants to become an employee. It also plays a crucial role where the companies stand regarding the bill, as it can have a huge impact on their business model:

  • Whether or not the company is willing to make changes in their models and hire part-time or full-time employees instead. (Some expect them to start the recruitment process from scratch and not employ their former independent contractors.)
  • Whether the company wants to push for reversing the law and offer benefits to their independent contractors. (Listed in the Protect App-Based Drivers and Services Act, for example.)*
  • Whether or not the company can afford to pay the extra costs employers usually pay on their employees’ income.

What should workers expect in general?

  • Workers as employees receive a minimum wage, overtime pay, unemployment insurance, worker’s compensation, paid sick days, paid family leave, and discrimination and sexual harassment protection. (It can also put an end to the practice of using tips to pay base rates, for example.)
  • Workers don’t have to file their own taxes.
  • Some argue that workers would lose their flexibility, yet this is not written in the law. Nothing stops companies from still allowing people to work flexible hours. Some companies that have already transitioned from the independent-contractor model and began to hire employees instead still let people set their hours. It must be mentioned, though, that this may mean blocks of time, so you may not be able to just go online and do a one-hour shift on a Friday.
  • Workers may not be allowed to work for multiple companies as employees.
  • Workers won’t be their own bosses anymore, which can also mean supervision.
  • Workers may have access to fewer hours than before.
  • Employees cannot deduct up to 20% of their income taxes.

*The Protect App-Based Drivers and Services Act includes:

  • 120% of the minimum wage, plus 30 cents per mile compensation toward expenses

  • Healthcare stipend after working 15 hours a week

  • Occupational accident insurance to cover on-the-job injuries
  • Automobile accident and liability insurance

  • Protection against discrimination and sexual harassment.
  • Recurring mandatory checks and safety training of drivers
  • Zero tolerance for alcohol and drug offenses

  • A cap on driver hours per day to prevent sleepy driving

Read also:

California Assembly Bill 5
Photo by Reuben Juarez on Unsplash

5. Stay updated!

We’d like to encourage you to share your personal experiences with others and/or get some up-to-date information from them. As other states are planning to adopt similar legislation, you may ask them some specific questions about your city. Connect with others to not miss any news regarding the California Assembly Bill 5 (AB5).