The Gig Economy and AB5

As the author of Thriving in the Gig Economy, I have gotten a lot of inquiries in the last month asking me whether the gig economy will crumble in California given AB5. For those who don’t know, AB 5 is the law signed by California Governor Gavin Newsom that will potentially render many gig workers employees rather than independent contractors. The law takes effect on January 1, but as many predict the worse, the future is far from certain. From my point of view, there are three main reasons why it is tough to gauge the impact of AB5.

Firstly, the big ridesharing companies will contest it in court, on the basis that they are technology companies not employers. Uber, Lyft and Doordash have already committed $30 million each to support a 2020 ballot measure to overturn the law. Clearly, these tech giants do not think the world will automatically change on 1/1/2020. Sentiment could be on their side; drivers who I poll unscientifically seem mostly confused and concerned that the flexibility that they value with the role will disappear if they are forced to become employees. Meanwhile the big on demand firms are coming up with other options, like hourly minimums and paid sick leave for those who work more than 20 hours. The horse trading has begun.

Moreover many other industries are at risk too from media companies to nail salons. Some say AB5 could end residential newspaper delivery, as “paper boys/girls”, a very part-time role would now need to be employed. Citizen journalists who provide articles to local magazines may also be restricted. Similarly, the wording of the bill makes it unclear whether the workers of a franchise entity are employed by the franchisee or the franchisor. There will be litigation.

Secondly, the verbiage in the law especially around the exemptions to it is so poorly written that lawsuits will arise. There are hiring criteria for various types of workers from professional services contractors to grant writers to construction workers. The criteria vary not just between classes of worker, but they can vary over time. Some sections are contradictory to others. In a word, it is messy and will no doubt be litigated. (A cynic might say, it is the full employment act for employment lawyers.)

Finally, the framers of the law did what so many journalists and politicians do – they define the gig economy as one cohort of on-demand workers. Indeed, most of the discussion of the potential demise of the gig economy is around the app based transportation businesses. But the gig economy is not homogeneous at all. The gig world includes drivers and delivery folks, but also has writers, data scientists, web designers, event planners and biostatisticians. Proof of this is the fact that estimates put the independent workforce at 19% of the California workforce or roughly 4 million people. The transportation industry is less than 10% of the total. The jury is still out what happens with those other +/- 3.5 million workers.

So, I do not predict the end of the Gig Economy come January. I do hope we might get some meaningful discussions about ways to address concerns about the new independent work models. Requiring them all to revert back to the modes of the past is not the best option, but lets get the dialogue going.

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