Next Christmas Santa Claus could decide to skip California if the state insists that his elves become employees instead of independent contractors.
This is the story.
California’s AB 5
During 2005, Charles Lee, a former Dynamex delivery driver, filed a lawsuit against the firm. Although the company hired on-demand drivers that could use their own vehicles for deliveries which they can accept or reject, he said he was an employee rather than an independent contractor. As an independent contractor, Lee would have sacrificed a slew of legal rights. Employees get a minimum wage, maximum hours, rest breaks, sick leave, unemployment insurance…the list is long.
Agreeing with Mr. Lee, the California Supreme court established a list of criteria that let businesses call a worker an independent contractor. Otherwise, in most cases, they are employees.
Fast forwarding to now, we would see that the result is California’s AB 5 (Assembly Bill 5), Passed during 2019, AB 5 is also known as the Gig-Worker Law. More than Dynamex, California legislators were concerned with Uber and Lyft and protecting all of the gig workers in the state. According to the “ABC” part of the law, you could be an independent contractor only if you were free from the company’s control and did similar work outside the firm. If not, you were an employee. The switch could cost Uber $500 million a year. At the same time, they said that their workers would lose flexibility. It was all supposed to begin on January 1, 2020.
But not for Uber and Lyft.
With Doordash, Postmates, and Instacart, Uber and Lyft got Proposition 22 on the November ballot. If it passes, ride-sharing and food delivery firms will be exempt from AB 5, If it does not pass, they go back to court.
Our Bottom Line: Unintended Consequences
AB 5 hit a glitch. While Uber, Lyft and other large companies were its targets, smaller businesses were hit. Theaters, newspapers, retailers, yoga schools, and so many others were eliminating their heretofore independent contractors because they no longer could afford them as employees. Free lance journalists were among the people that said the law hurt their livelihood. Others appreciated the extra money, benefits, and security. California’s legislators are responding with a list of exceptions to the law.
I assume they will include Santa Claus.
My sources and more: This WSJ article grabbed me. I love a many-sided issue with no real right or wrong answers. The more I read, in the Sacramento Bee, the Washington Post, the law itself, and Bloomberg Law, I saw that no one agreed. None of the articles even mentioned this proposal to create a third worker category and sidestep the entire brouhaha.
Our featured image of the elf is from Pixabay.