First things first. What’s a gig economy?
Working “gigs” isn’t a new concept — people have long served as contractors, creators and craftsmen as part of a flexible workforce. The past decade, however, has seen a tremendous influx of project-specific workers; advancements with technology have opened innumerable doors to consumers who are looking for particular goods and services — and want them delivered with the touch of a button.
There are three distinct groups that make up the current gig economy:
- Workers who are paid for each task or project — each “gig”
- Consumers who need a specific service (a ride, for example)
- Companies that connect consumers to the workers who can provide the service they’re seeking
The rise of the gig economy is demanding reform on behalf of the workforce behind it. With recent cases in California, for example, the definition of what constitutes an independent contractor versus an employee is changing. To date, the most solid attempt at shaping the definition of an independent contractor is California’s Assembly Bill 5 (AB 5).
The current state of AB 5
Effective January 1, 2020 for unemployment issues and July 1, 2020 for workers’ compensation issues, AB 5 codifies the decision in the 2018 case of Dynamex Operations West, Inc. v. Superior Court of Los Angeles and clarifies its application. Enacting a three-part test employers must use to determine a worker’s classification (learn more about the ABC test below), the bill will limit the ability of companies to classify their workers as independent contractors rather than employees. While employees receive a set salary or hourly wage, a gig worker is paid for a specific, temporary job, even if it stretches for an indefinite amount of time. The bill was borne out of concern that companies were incorrectly deeming their workers as contractors, thereby denying them certain benefits and protections.