Press Releases | Gig economy

News from EPI California’s AB5 will give workers more protections than weak assurances in gig companies’ ballot initiative

A new fact sheet from EPI’s Director of Government Affairs Celine McNicholas and Policy Associate Margaret Poydock details how workers would benefit from Assembly Bill (AB) 5 in California, a new law that aims to combat the misclassification of workers as independent contractors by adopting an “ABC” test to determine employee status.

Under the ABC test, workers are only classified as independent contractors where a business demonstrates that workers a) are free from control and direction by the hiring company; b) perform work outside the usual course of business of the hiring entity; and c) are independently established in that trade, occupation, or business.

McNicholas and Poydock note that AB5 will ensure that more of California’s workers have access to basic labor and employment protections denied to independent contractors including: minimum wage and overtime protections, paid sick days and family leave, workers’ compensation benefits, and unemployment insurance benefits. The law, which will take effect on January 1, 2020, will apply across all sectors of work in California, making it more difficult for companies to misclassify janitors, construction workers, and domestic workers.

AB5 has faced intense opposition from digital platform companies, with Uber, Lyft, DoorDash, Postmates, and Instacart pledging over $100 million for a ballot initiative—Protect App-Based Drivers and Services Act—that would exempt their workers from AB5 regulations. While the ballot initiative would provide gig workers with some access to benefits and a wage floor, it denies these workers coverage under the most basic employment protections by continuing to allow companies to misclassify their workforce. Recent EPI research has illustrated how Uber drivers do not resemble independent contractors and found that Uber drivers earn the equivalent of $9.21 in hourly wages.

“Misclassification is a widespread problem affecting millions of workers. AB5 would make it more difficult for employers to misclassify their workers and require all employers to play by the same set of rules,” said McNicholas. “Californians should not allow corporations to exempt themselves from fundamental worker protection laws by buying a ballot initiative that would lead to more worker misclassification across the state.”

New legislation, the Protecting the Right to Organize Act, has been introduced in Congress that would prevent the misclassification of workers nationwide and protect the right to form a union.

“Misclassifying workers as independent contractors robs them of basic workplace protections like minimum wage, overtime pay, and paid sick time,” said Poydock. “AB5 is an important step forward for workers in California. On January 1, 2020, when AB5 takes effect, employers across the state should comply with the law and ensure that workers are properly classified and receive the required protections.”

See related work on Unions and Labor Standards | Gig economy