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Gig is up for independent contractors in California

Gig is up for independent contractors in California

Companies will have to pass a three-part test to prove independent contractors should not be employees if AB 5 takes effect

By Reggie Ellis @Reggie_SGN

SACRAMENTO – The gig is up for people looking to supplement their income with contract work.

On Sept. 11, the California Assembly passed Assembly Bill 5, a bill that could dramatically change the working landscape in the state. The bill would force companies using independent contractors to hire those workers as employees unless they pass a three-part test starting Jan. 1, 2020. Known as an ABC test, companies must answer three questions to determine if the worker is an independent contractor:

  • The worker is free from the control and direction of the hiring entity;
  • The worker performs work that is outside the usual course of the hiring entity’s business; and
  • The worker is customarily engaged in an independently established trade, occupation or business.

Authored by Assemblymember Lorena Gonzalez Fletcher (D-San Diego), the bill includes an exemption for licensed insurance agents, certain licensed health care professionals, registered securities broker-dealers or investment advisers, direct sales salespersons, real estate licensees, commercial fishermen, workers providing licensed barber or cosmetology services, and subcontractors in the construction industry. The bill’s passage was celebrated as a win for organized labor while opponents like Uber, Lyft, and the newspaper industry said it will take away flexible hours needed for people with day jobs to supplement their incomes, especially in a state with a severe shortage of affordable housing.

The bill passed on a partisan vote as Democrats led the charge to rewrite the rules of independent contractors, often referred to as the gig economy. The State Senate passed the legislation on Sept. 10 and Gov. Gavin Newsom has already pledged to sign it. The Governor had not signed AB 5 as of press time.

Prior to the vote, Senate Republican Leader Shannon Grove (R-Bakersfield), who represents portions of Tulare County, introduced an amendment to the bill to protect all independent contractors and not just those exempted under the original text. Grove said the original bill would harm tens of thousands of independent contractors by making it difficult for them to keep their employment status and carves-out contractors in some industries while excluding others.

“Single mothers and students who choose to be independent contractors are going to lose their freedom of choice that allows them to work when they can. Hardworking Californians will suffer because of the Democrats’ onerous legislation,” said Senate Republican Leader Shannon Grove. Senate Republicans’ amendments included the following industries:

  • Healthcare facilities include companies that employed healthcare providers such as skilled nursing facilities.
  • Design industry includes landscape architects, geologists, geophysicists, veterinarians, accountants, land surveyors, and others.
  • Franchisors and franchisees of Cinnabon, IHOP; Pizza Hut; Marriott; KFC, Jack in the Box; Taco Bell and others.
  • Physical therapists
  • Interpreters and translators
  • Motor Clubs such as the American Automobile Association (AAA).
  • Newspapers carriers and distributors
  • Single-truck owner-operators
  • Forestry industry such as engineers, licensed timber operators, and others.

None of the amendments made it into the bill but another bill would provide some relief for the newspaper industry. Gonzalez Fletcher also introduced Assembly Bill 170, a companion bill to AB5, would exempt newspaper distributors and carriers from the rules of AB 5 until Jan. 1, 2021.

If AB 170 fails to pass, it would affect the legal standing of AB 5, giving state Republicans one last chance to block AB 5. AB 170 was amended by the Senate on Sept. 10, but had not been approved by the State Senate as of press time.

“Senate Republicans are committed to helping those working individuals who need the freedom and flexibility of independent contracting work,” Grove said. “Legislative Democrats have excluded multiple industries that employ tens of thousands of hardworking independent contractors who may no longer be able to pursue their career of choice.”

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