Questions about California’s “Gig Economy” Employee/Contractor Bill

I’ve been thinking a lot about the bill, AB-5, sitting on California Governor Newsom’s desk waiting for his signature. It could change the rules for classifying certain gig workers as employees rather than contractors. Most of the articles that I have read talk about this bill’s potential effects on giants like Uber and Lyft, but I have been thinking about its implications on other businesses, especially the types of small businesses that my firm supports. Will this bill make it more difficult for small businesses that rely on the flexibility of contractors to upscale and downscale their operations depending on the ups and downs of their business cycles? How will they survive if they need to bring on more full or part-time employees? Will they be able to afford an increase to their fixed expenses for paying unemployment insurance costs, the employer portion of social security and Medicare, health insurance, worker’s compensation and paid time off?

I get it. I understand why this bill seems like a good idea and I understand how the legislators would have felt the impetus to pass legislation such as this. There are many workers who are currently struggling to make ends meet by piecing together gigs and coming up with enough work to pay the bills. But I have concerns and questions. For example, will this law that is designed to protect gig workers actually end up hurting them and the businesses they work for? Will this lock in (or limit) certain workers who want more flexibility in their work schedules to a more structured and regimented employer-employee relationship? Will the result of this law be that businesses do without these workers? Or, will businesses simply find it impossible to exist under this new structure? The law has many nuances, and employers are working to understand exactly which categories of workers will be covered.

The consideration of this bill will likely encourage other states to consider similar measures. How could this affect you or your business? Stay tuned to see how this develops.