A new ruling from the California state supreme court may open the door for legislators in that state to once again try to wipe out the gig economy, including companies like Uber, Lyft and Airbnb. Previous, direct attempts to regulate such companies out of existence have failed so far, but this case deals with a tangentially related employment area. The court is ordering a change to how the state classifies independent contractors along with temporary employees.
By allowing companies to classify certain workers as independent contractors, they don’t have to comply with minimum wage laws, pay overtime or conform to other compensation rules. The question now is whether or not truly independent operators like Uber drivers will fall under this new classification guideline, basically wiping out the company’s entire business model. (LA Times)
The rise of independent contracting has delivered benefits for some, such as greater flexibility for workers and lower costs for employers. But it also ensnared some people in low-wage jobs without benefits, working schedules that can change daily.
Now, following a state Supreme Court ruling Monday, businesses across California could be forced to reclassify swaths of their workforces as employees, with profound effects on workers and companies.
By toughening requirements for when a worker is actually an employee, the California Supreme Court won praise from labor advocates who say the move will put more dollars in the pockets of previously misclassified workers. Independent contractors are not subject to minimum wage, overtime or workers’ compensation requirements. The ruling may force companies in certain industries, especially in the app-driven gig economy, to change their business model.
“Almost every industry has dipped their toe in the independent contractor, freelancer model,” said Rich Meneghello, a partner with Fisher Phillips, a national law firm that represents employers. “As of today, they are all going to have to apply this new test.”
There are numerous methods used by employers to cut costs and redefine roles toward that end. Temp companies have really surged in recent years as more and more companies do all of their “hiring” through such agencies. The temp workers frequently receive lower pay and no benefits (or substantially reduced packages). That may be fine if it’s a truly temporary job with a defined start and stop date, but some companies keep their “temp” workers on the job for years, never offering them a permanent position. It’s understandable how these workers might benefit from a change like this.
But California lawmakers are immediately focusing on the gig economy. If they attempt to classify Uber drivers or Airbnb hosts as “employees” it will destroy the business model of those companies and end the opportunity for those workers to earn extra money. But if there’s any honesty among those considering the question it really shouldn’t even be a consideration. These gig economy participants aren’t “employees” in any traditional sense of the word. They don’t report to a human being as their boss. Their only “evaluations” come from their riders and guests. They are assigned no set number of hours to work or a number of days they must make their rooms available. They work for themselves and only use the app provided by the “parent company” as a tool to facilitate their efforts.
If California attempts to force ridesharing companies to pay drivers by the hour and give them benefits, they will have put an end to the company as it exists today, at least in California. The same goes for similarly restricting Airbnb. That will make the taxi companies, the big hotel chains, their unions and their lobbyists very happy to be sure. And the money those entities donate to politicians will have been well spent. But both the drivers and hosts who work in the gig economy and the consumers who make use of their services will probably be ready to revolt.