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California Takes on Gig Economy and Its Workers

The California Legislature has passed the first bill in the country to classify “gig” workers as employees. Approximately, one million workers in California are categorized as independent contractors instead of employees. Typically, these workers are not entitled to minimum wage protections, unemployment insurance, health insurance, and other benefits often accorded to employees. Under the new bill, workers who are a part of a company’s regular business or where the company exerts control over how workers perform their work will be classified as employees. Possible workers impacted by this legislation: Uber and Lyft drivers, DoorDash and Postmates couriers, janitors, nail salon workers, and construction workers. The California governor is expected to sign the bill.

Companies such as Uber and Lyft have asserted that reclassifying their drivers as employees would destroy their businesses. Reportedly, costs for the companies could go up 20 to 30 percent. They also believe their drivers appreciate being independent because of the flexibility it affords them. While the new law does not expressly impact whether drivers set their schedules, it is speculated that Uber and Lyft will limit the number of drivers who work during certain shifts to ensure it justifies their payroll costs. Uber, Lyft, and DoorDash have pledged to spend $90 million to have a measure placed on the California ballot that would exempt them from the new legislation. They say they are willing to offer basic protections and benefits, including minimum earnings, access to health care plans and representation in the company.

Enforcement of the current anticipated legislation will come in part from the ability of large cities to sue companies not in compliance. As the fifth biggest economy in the world, California’s new anticipated law will likely have an impact across the country. Within these companies, it will reflect a huge change requiring time to implement. Uber representatives have asserted that they will not have to reclassify their drivers after the new law is in effect because they see their company’s primary work as a “tech platform” that provides many services.