The Implications of the AB5 Law in California
Listen to this articleWith the new year now in full swing, there are a lot of new employment laws across the country that are taking effect. One of the most controversial and hardest hitting employment laws is called AB5.
This is a bill that was recently passed in California that has to do with independent contractors. For those who don’t know, an independent contractor receives a 1099 form to complete his or her taxes in contrast to the W-2 form that employees receive.
Many people believe that this law was published specifically to target some of the mobile app taxi companies, also known as rideshare companies. Some of the most prominent examples of these companies include Uber and Lyft. Over the past few years, there has been a lot of discussion surrounding the way these companies treat their drivers. This has led some people to wonder whether or not these drivers should actually be considered employees instead of independent contractors. This is what the new law in California was meant to address.
Under this new law, there is a test that all companies and organizations must complete on each of their independent contractors. If the independent contractor is unable to meet all three of these criteria, then he or she must be considered an employee. First, the independent contractor needs to perform work that is outside of the scope of that company or organization’s typical business day. Second, the independent contractor must be free from the control of that company or organization. Finally, the independent contractor should be able to perform this work for other companies or businesses. If the independent contractor does not meet all three of these criteria, then he or she must be considered an employee.
The intent of this law is to get businesses and organizations to treat their employees better. If someone is hired on as an employee, then he or she will have access to other benefits such as health insurance and vacation time. Sadly, this isn’t exactly what is happening. Some independent contractors are losing their jobs. Furthermore, independent contractors are also filing lawsuits against California. In addition to rideshare drivers, truck drivers and freelance writers are also being hit particularly hard. As the new year continues to unfold, it will be interesting to see what happens to this new law. This law may not work exactly as it was intended and it may end up costing people their jobs. Some independent contractors have already won a stay from the enforcement of this new law.
