Gig Economy Threatened In California By New Law

The dreams of being able to work independently working through the gig economy may be coming to an abrupt end in the state of California soon.

According to a recent article appearing on the HR Exchange Network website, a ballot measure that would exempt companies like Uber, Lyft, and DoorDash from the bill, AB-5, which was signed into law by Governor Gavin Newsom, will be taking effect on January 1, 2020.

The original legislation before the proposed ballot measure would force companies like Uber, Lyft, and DoorDash to treat contract workers as employees. Up until this time, companies have been using contract workers or freelancers at a lower cost because they are not required to afford them the same rights and benefits as they are required for employees. These rights and benefits include things like health insurance, sick leave and vacation, and even the federally mandated minimum wage.

The new California law was implemented in response to a ruling by the National Labor Relations Board that stated drivers for companies such as Uber and Lyft were contractors because they own their own vehicles and set their own hours and can work for competitors in the same field if they choose to do so. Because California legislators disagreed and assert that the gig economy is central to the business model of companies like Uber and Lyft and should be treated as employees. 

The new law would raise the operating costs of companies like Uber, Lyft, and DoorDash by as much as 20 to 30 percent and that, according to those businesses, would be detrimental to their operations if they had to treat their drivers in California as employees.

This may also force gig workers to move to other areas to keep being able to work on their own terms through a wide variety of businesses such as writers, contractors, janitors and workers in nail salons, for example. Because the modern workplace is changing and going more toward gig workers, the federal government is also taking a keen interest in the gig economy so that it keeps up with current laws that are designed to protect workers.