California’s Gig-Work Law, AB5: What You Need to Know Now

By The Intersect Group

A recent article in the San Francisco Chronicle detailed the landmark gig-work law, AB5, which took effect on January 1, 2020. From the comment section of this one particular article, to social media (just search #AB5), to demonstrations to activist rallies – AB5 has certainly started the New Year off with a bang.

While the implications of the new law have yet to be fully realized, here are the AB5 fast facts:

  • What the law does: “It codifies, clarifies and extends a 2018 California Supreme Court decision called Dynamex that makes it harder for companies to claim workers are independent contractors. It says workers should be employees unless a) they are free from a company’s control, b) do work outside the company’s core business, and c) have independent enterprises performing the same type of work.” (San Francisco Chronicle
  • Why AB5 was created and what it was intended to do: The creator of AB5, Assemblywoman Lorena Gonzalez (D-San Diego), said workers need the protections and benefits of being employees to prevent them from being exploited. 
  • Who this impacts: While a range of professions, including doctors, lawyers, architects, engineers and accountants, are exempt from the new law’s strict test, they are instead covered by a previous test known as Borello. All others classified as independent contractors – from app-based gig workers, like Uber, Lyft and DoorDash drivers, for example, to truck drivers to freelance photographers and writers – could all be impacted by AB5. 
  • The opposition: Is against AB5 as some out-of-state companies are dropping California freelancers while others are requiring gig workers to incorporate – a costly endeavor that often requires assistance from a lawyer and an accountant. 
  • Those in support of AB5: Are seeking the protections and benefits of being an employee. For instance, wage guarantees and other employee benefits like paid time off and health insurance.

#FightForFreelances, #fixAB5 and other hashtags have been trending the last several weeks. For independent contractors and employers in states outside of California, the implications are even less known. Will other cities, states and even countries follow suit? In Toronto, Canada, for instance, Uber drivers are unionizing – a clear sign of the times, with more union groups like it undoubtedly to come.

For now, in California, some employers are taking proactive measures and reclassifying independent contractors as employees while others are not doing anything, yet, as they wait to see what happens next and how the law will be enforced.

If you would like to talk about your independent contractor workforce, get in touch with us.

Please be advised: The Intersect Group is not a law firm, nor do we provide legal, business or tax advice.