The rise of the gig economy has contributed to several questions over the labor rights of independent contractors compared to fully-established employees. Confusion over the true definition of an “independent contractor” has added another layer of uncertainty to the debate.
California lawmakers hope a new bill, Assembly Bill (AB) 5, will clarify which workers truly qualify as independent contractors. The bill is based on the “ABC test” definition of independent contractors that was outlined in the 2018 California Supreme Court case, Dynamex Operations West, Inc. v. Superior Court.
According to the ABC test, employees are considered independent contractors if they meet the following conditions:
- The worker’s performance is not controlled by their employer;
- Their work is independent from the employer’s central business model; and
- The worker is involved in their own independent business venture(s).
AB 5 would exclude many workers who were previously classified as independent contractors, instead classifying them as employees. As employees, these workers would be entitled to more benefits that independent contractor cannot receive, including workers’ compensation benefits.
There are a few exceptions to the ABC definition. According to the Los Angeles Times, “doctors, insurance agents, financial advisors, and ‘direct sellers’ who offer products to consumers under the aegis of such companies as Mary Kay, the cosmetics firm, or Herbalife, the supplements giant,” will not be reclassified under the ABC test. An industry in the center of the independent contractors debate — “gig economy” tech companies such as Uber, Lyft, and Postmates — will not be excluded, so their workers will be redefined as employees. The law is a success for workers who have long felt that the independent contractor classification has limited their employment benefits.
Businesses who previously employed independent contractors and are now required to issue benefits to workers who have been reclassified as full employees will likely face financial stress as a result of the new laws. Although some reclassified workers support the bill, there are others who fear their new status as a full employee will affect their wages and take away the flexibility they enjoyed as independent contractors.
Contact Alvandi Law Group, P.C. to discuss your workers’ compensation case during a free consultation. Call (800) 980-6905 or submit your information on our website to get in touch with our team of attorneys.