California is potentially setting the precedent on how “employees” will be defined in the future. On September 18, 2019, Governor Gavin Newsom signed Assembly Bill No. 5 into law. The bill, dubbed the “Uber Law” will go into effect on January 1, 2020. Under the new statutory provisions, a number of industries such as trucking, cleaning companies, and most significantly, those with “gig” workers, will be required to recognize independent contractors as employees. This change in classification of employment status means that these workers will now be entitled to traditional employment benefits such as minimum wage, sick time, and health insurance.
The “Uber Law” will require an ABC test to determine classification of workers, making the status of an “employee” a default. This law will have a significant financial impact on companies who rely heavily on freelance workers and/or independent contractors. This will also mean that these “employees” will be eligible for coverage under workers’ compensation and commercial liability policies of their employers.
California is typically ahead of the curve in expanding rights of employees. Employers, in other areas of the country, should monitor the impact this new law has on employment practices and operations, as similar changes may become considerations under other state laws.