Gig work has defined the ever-changing job scene during the last decade. The traditional employment models still exist, but many people opt for the freedom and flexibility of the gig economy, working as independent contractors instead of employees. The business models of companies like Uber, Lyft, and DoorDash revolve around the participation of gig workers. While these organizations saw great success, some lawmakers saw the potential for exploitation.
That led to the creation of California Assembly Bill 5 (AB5).
AB5 is a piece of Californian legislation that went into effect on January 1st, 2020. Also known as "The Gig Worker Bill," AB5 turned gig work on its head! The legislation required companies hiring independent contractors to reclassify them as employees.
When the law went into effect, it became the center of controversy. Like many laws focusing on labor, AB5 had its advantages and disadvantages.
Initially, AB5 came to be a way to hold companies like DoorDash, Uber, and Lyft accountable. Lawmakers wanted to ensure that gig workers were treated fairly and received the pay they deserved. The idea of AB5 was to encourage companies to reclassify contractors as employees, making them eligible for W-2s, benefits, and more protections.
However, detractors argue that AB5 eliminated the very thing that gig workers want: Freedom. The legislation made it harder for companies to continue hiring independent contractors, taking job opportunities away from millions of eager gig workers. There was also a concern that reclassification would increase operational costs, resulting in higher customer prices.
What is AB5 and its ABC Test?
With AB5, companies were required to use the ABC test to determine whether workers were employees or independent contractors. The three-pronged test includes three points companies must prove to maintain independent contractor hiring practices.
Unfortunately, these points were not the easiest to prove. The ABC test made it more challenging to verify workers are independent contractors than the systems previously used in California.
The Current State of AB5
The noise around AB5 forced legislators to rethink the bill. In September 2020, Assembly Bill 2257 was passed. It went into effect immediately and rewrote many of the challenging requirements in AB5. The most significant benefit was its list of exemptions, allowing freelancers to resume their operations.
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Jeson Clarke is providing info about single platform for your hotshot, scheduled, daily route, and freight deliveries. You can find his thoughts at daily deliveries blog.