馃攳
California's AB-5 Law: Who can be considered an "independent contractor"? - YouTube
Channel: unknown
[0]
In September of 2019,
[2]
under pressure from organized labor,
[4]
the California legislature passed AB-5.
[7]
It was signed into law by the governor the following day.
[10]
The bill codified the new worker classification test,
[13]
making it much more difficult to be considered
[15]
an independent contractor under state law.
[18]
AB-5 has generated a great deal
[20]
of controversy and uncertainty.
[27]
The question of classifying workers
[29]
as employees versus independent contractors,
[32]
is central to the rise of the internet economy.
[35]
Technology has enabled greater flexibility for individuals
[39]
to start and run their own businesses,
[41]
to work outside the traditional confines of employee.
[45]
Federal employment laws, which started
[48]
with New Deal-era protections for workers,
[50]
define employees with balancing tests.
[54]
State law often imposes more rigid rules.
[57]
With backing from organized labor
[60]
and often supported by lawmakers,
[62]
looking for guaranteed revenue
[63]
from employment taxes and withholdings,
[66]
many jurisdictions use a formulaic ABC test.
[71]
Its virtue is that it's easy to apply.
[73]
However, it takes away flexibility
[76]
for parties that want to decide for themselves,
[79]
how to structure their relationships.
[82]
California AB-5 is the latest example of such a test.
[86]
It presumes that an individual is an employee
[89]
unless she satisfies all three elements.
[93]
A: The business does not control the individual's
[96]
performance of the service.
[98]
B: The work is outside of the usual course
[102]
of the business operations.
[104]
And C: The individual is operating an independent trade,
[107]
occupation, profession, or business.
[111]
Other states have similar ABC tests, but California's test
[115]
is uniquely difficult for entrepreneurs and businesses.
[120]
The B prong prohibits the workers
[122]
from being independent contractors
[124]
if they are providing services that are integral
[127]
to the hiring entity's business model,
[130]
regardless of what steps they've taken
[132]
to set up their own business, and to be truly independent.
[136]
A worker performing standard business operations
[140]
of the company hiring them,
[141]
must be classified as an employee.
[144]
In most states, a worker could still be allowed
[147]
her independence if she's performing the work
[150]
in her own space, but not in California.
[153]
California's new rule says,
[155]
it doesn't matter where the work is performed.
[158]
Advocates for AB-5 maintain that the stricter ABC test
[163]
is necessary to prevent companies from exploiting workers.
[167]
But many are asking whether this goes too far
[170]
in curbing freedom for entrepreneurs.
[173]
The test makes it impossible for workers to start
[175]
their own businesses and work independently
[178]
if their skills fall inside
[180]
the usual course of business operations
[182]
for the company that might hire them.
[184]
And existing businesses now feel compelled
[187]
either to convert independent contractors
[189]
into full-fledged employees,
[191]
or to stop working with them altogether.
[193]
That's because they face major liabilities
[196]
if they errantly continue treating workers like contractors.
[200]
Meanwhile, labor advocates are pushing AB-5 style
[203]
legislation in other states and even in Congress.
[207]
Whether lawmakers follow or reject California's model
[211]
may have a major impact on entrepreneurialism in America.
[216]
Should workers need to lose their independence
[218]
to keep their livelihood?
[220]
How do we balance innovative business models
[223]
with concerns about worker security?
[225]
What are the trade-offs between independence
[228]
and security for workers?
[230]
How do we deal with these trade-offs
[233]
in worker classification laws?
Most Recent Videos:
You can go back to the homepage right here: Homepage