California’s Gig Law, AB 5, was passed in September to protect freelancers and “gig economy” workers. But has it cut them off from earning revenue—however unsteady—instead?
The new gig economy law in California, formally called Assembly Bill 5, changes the standards for who’s considered an independent contractor. In doing so, it requires companies to provide wages and benefits packages to employees they previously classified as independent contractors. The law took effect at the beginning of 2020.
In total, the California gig law could affect as many as 1.5 million workers across all industries. While it’s primarily targeted toward ride-sharing companies like Uber and Lyft that pay drivers based on how often or far they drive, AB5 also restricted how trucking companies hired truckers.
In response to a suit filed by the California Trucking Association, a federal judge recently issued a temporary restraining order. Thanks to this exemption, California trucking companies can resume business as usual while the federal court considers a permanent injunction.
On January 1st, a federal judge blocked AB5 from affecting the trucking industry on the basis that the state law violates federal law. This measure empowers trucking companies to continue hiring truckers on a freelance basis, excluding the industry from these new freelance restrictions.
Over 70,000 California truckers work on an independent basis. Rather than working for specialized trucking companies or driving for companies directly, independent truckers (also called owner-operators) take on work as they see fit. This status enables drivers to take full ownership of their profits.
AB5 would have eliminated lucrative delivery opportunities for independent truckers. As many truckers strategically schedule multiple deliveries for different companies throughout the week, AB5 would eliminate this flexibility. Operating as employees would cause these truckers to abide by predetermined routes and, in turn, miss new opportunities. Overall, this would have disrupted interstate commerce.
Additionally, losing this coveted “independent” status would also force truckers to squander clean truck investments, some as high as $150K.
However, the jury’s not out quite yet.
While the temporary block is in effect, U.S. District Judge Roger Benitez is still considering whether or not to enact this law. In the coming months, this decision could spell the future for the trucking industry, which recently suffered cyclical setbacks.
Many have spoken out against the controversial California gig economy law in California. However, the intention behind the bill was to provide gig employees the same benefits that full-time employees enjoy by changing the standards for independent contractors.
App-based businesses, like Uber, Lyft and Doordash, have created new and easily accessible opportunities for willing drivers. These “work-as-you-go” companies offer payment based on both time spent and miles driven. As a result, these ride-sharing apps have become a simple way for people to earn income, and for workers to earn additional revenue. The barriers to entry are low, and the onboarding process is more streamlined than ever.
Uber and other similar companies have, so far, pledged $90 million for a ballot initiative against the law.
However, as many labor activists have argued, this simplified model also denies workers—including some that drive for 40+ hours per week— the benefits and guaranteed wages they’d receive elsewhere. Additionally, this unsteady model also prevents access to standard benefits like sick time, unemployment/disability insurance, and retirement packages.
But, the low upfront cost is part and parcel of what enables these tech giants to pay at-will workers in the first place.
New Jersey has already introduced a similar bill, and New York is pushing for the same measures.
AB5 is also changing how companies hire and pay traditional freelancers, like writers and photographers.
Freelance writers, editors and visual journalists, many of which built relationships with media companies, are now limited to 35 submissions per year under this new legislation. After reaching this limit, they must be considered “employees”, and given the appropriate tax benefits and wage guarantees.
In theory, this new legislation would encourage media companies to graciously welcome longtime partners into full-time positions. But in practice, many will likely lose this work altogether.
Following the announcement, Vox Media—which has a reputation for relying on freelance workers—severed ties with almost 200 workers. While this Vox must fill the void with almost 20 full-time positions, it eliminated opportunities for many more.
In addition to limiting journalists’ opportunities, many also argue that these limitations restrict free speech.
The American Society of Journalists and Authors and the National Press Photographers Association, have already spoken out against the California gig law. These groups, which together comprise approximately 650 members, have filed a lawsuit requesting a similar exemption.
If the gig economy law disrupted your operation by changing how you can hire employees, then it could impact your cash flow. A revolving line of credit can help you stay ahead of this curve—whether you’re in trucking, the media, or another industry—by giving you the cash you need.
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Matt Carrigan is the Content Writer at National Business Capital & Services. He loves spending every day creating content to educate business owners across every industry about business growth strategies, and how they can access the funding they need!