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California bill identifies gig economy workers as employees

Gig economy workers for app-based companies such as Uber and Lyft have long been fighting to obtain rights to employee benefits such as job security and healthcare. From a legal perspective, workers for these type of companies are identified as independent contractors, therefore, exempting their employers from providing such benefits. For gig type companies of today, this is how the big money is made - low costs leading to high profit margins.

All this might soon change drastically, in light of a bill passed by the California State Assembly yesterday. Proposed by State Assemblywoman Lorena Gonzalez, the bill is called Assembly Bill 5 and it will require gig economy companies to classify their workers as employees instead of contractors, but only if the organization 'exerts control over how they perform their tasks or if their work is part of a company’s regular business'.

It is expected that the bill - which won 29 to 11 in a vote at the California State Senate - will be signed by the state governor, Gavin Newsom, once it has gone through the State Assembly. Newsom endorsed Assembly Bill 5 earlier this month, causing members of the public to feel confident that the bill will be passed. Should this happen, the bill would come into effect from January 2020 onwards and apply to all companies, app-based or not, that fall under the terms constituted in Assembly Bill 5.

State Senator Maria Elena Durazo commented on the advancement of the bill:

“Today the so-called gig companies present themselves as the innovative future of tomorrow, a future where companies don’t pay Social Security or Medicare. Let’s be clear: there is nothing innovative about underpaying someone for their labor. Today we are determining the future of the California economy.”

Once passed, this new bill could potentially have massive effects on all businesses which hire workers on a contractual basis regularly, ranging from app-based firms such as Uber and TaskRabbit to traditional business like food-delivery services, nail salons, cleaning services and even construction companies.

While gig workers are thrilled at the passing of Assembly Bill 5, their employers are far from happy. While representatives of Uber have yet to make a statement regarding the bill, Adrian Durbin, a spokesperson of fellow ride-hailing app Lyft, expressed the 'disappointment' of the company:

“Today, our state’s political leadership missed an important opportunity to support the overwhelming majority of rideshare drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits.”

At this point in time, it is impossible to determine exactly how many companies and businesses will be affected by this bill, and whether other U.S. states will be influenced and decide to follow suit. Only time will reveal the full impact of Assembly Bill 5 if it goes through the State Assembly of California.

Source: The New York Times

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