The Battle for Independence: California and Independent Contractors

As expected, the legal battles over AB5 (California’s Independent Contractor Law) have begun.

The American Society of Journalists and Authors and the National Press Photographers Association have filed a lawsuit challenging AB-5 on constitutional grounds (First and Fourteenth Amendment), as the law only allows 35 submissions per year for the same publication without becoming an employee.

In November 2018, the California Trucking Association is challenging AB5 on the basis that it runs afoul of federal law which prohibits states from enforcing any law related to the price, route, or service of a motor carrier.

Most recently, Uber and Postmates has filed a lawsuit alleging that AB5 unfairly targeted the gig industry. These corporations allege that the “nonsensical exemptions” to the law have no rhyme or reason and are so ill-defined.

Meanwhile, Lyft, Uber, and DoorDash are taking the fight to voters by proposing a ballot initiative for the November 2020 election that seeks to enable drivers and couriers to continue to be independent contractors.

What’s the big deal?

The fight over the misclassification of employees as independents contractor is more than just a battle over labels. It’s all about money.

According to the California Labor Commissioner, the misclassification of workers as independent contractors costs the state an estimated $7 billion in lost payroll taxes each year. This includes workers’ compensation, unemployment-insurance premiums, Social Security and Medicare contributions.

The state wants the tax revenue and it must come from somewhere. The most obvious place is from the employers, which lawmakers believe have endless amount of funds. In the case of the gig economy, which utilizes a large independent workforce, the tax burden could end the entire industry in California.

What do the Workers Think?

It depends who you ask. The propaganda will be in full force. Corporations will declare that workers want the freedom provided to independent contractors, who are free from supervision and can set their own hours. The state believes that workers want the protections afforded to employees such as paid overtime and mandatory lunch breaks.

What workers really think depends on the individual. Some people value freedom over mandatory rest breaks. Other workers chose to be independent contractors because they need a job.

Who Will Win this Battle?

Unless the legislature has a sudden feeling of regret, this battle will be decided in a court of law. That is not so say that the court will make another landmark decision. On the contrary, these types of matters are often decided on a case-by-case basis. A litany of new lawsuits is expected and courts will utilize the ABC Test to decide worker classification. Regardless of which side you support, the most important thing to do is seek the advice of competent legal counsel.

Knowledge is power. As with vehicles and health, prevention is better than treatment. It is better to know about liability before a lawsuit is filed. If a lawsuit has been filed, it is already too late.

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Daniel Thompson is an employment lawyer with Davis & Wojcik APLC, a Southern California based law firm with offices located in Temecula and Hemet. He can be reached at (951) 652-9000.