California’s just passed a bill that, once signed by Governor Gavin Newsom, will require gig economy workers to be reclassified as employees. The bill codified a recent decision by the California Supreme Court, Dynamex Operations West v. Superior Court of Los Angeles County, which laid out a new standard for when workers should be classified as employees rather than independent contractors for purposes of California’s wage order rules. Under the new California bill, workers are classified as employees if the company directs their tasks and their work is part of the company’s main business.
Unlike contractors, employees are entitled to a number of benefits and protections under both federal and state laws. Restricting the standards for classifying workers as independent contractors will make it harder for gig economy companies to prove that their workers aren’t staff, while ensuring key benefits and protections, like minimum wage, insurance and overtime pay.
Other states have adopted legislation extending benefits such as unemployment insurance and workers’ compensation to independent contractors, but California’s bill is the strongest and most comprehensive to date. Similar bills aimed at protecting workers have been drafted in other states such as New York, Oregon and Washington.
Governor Newsom is still engaged in negotiations with Uber, Lyft and other gig economy companies about possible exceptions or caveats to the bill. According to Uber, the work of its drivers falls outside the scope of the company’s usual course of business: serving as a technology platform. It remains to be seen whether this argument will allow the company, and those with a similar business model, to keep its drivers from being classified as employees.
Reactions to the bill are split. Some argue that that the new classification framework will force employers to cut back on hiring in the face of rising costs. Some Uber and Lyft drivers worry that that it will curtail their work schedule flexibility. California contractors in remote-based fields have expressed concern that if other states do not follow suit, they will be unable to find work when companies opt for workers from other states who can be classified as independent contractors without needing to be added to the payroll.
But the bill could affect not only gig workers at companies like Uber, Lyft, DoorDash, Postmates and Instacart, it could change the employment status of more than a million low-wage workers in California, including nail salon workers, janitors and construction workers who are not covered by labor laws.
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