CA Assembly Bill 5 passes: Is the gig economy doomed? (Part 2)

Last week, in Part 1 of this Spend Matters PRO series, we covered the controversial California Assembly Bill 5 (AB-5) that changes the definition of who is an employee and who is a contractor — sending shockwaves through the ecosystem of businesses and workers that constitute the so-called gig economy (that part of the labor market where businesses, including online gig platforms like Uber, engage workers as non-employees). Though California Gov. Gavin Newsom signed the bill into law this week and it is slated to take effect January 2020, the future is still uncertain, and the controversy still rages.

Gig-platform companies providing ride, delivery and other services have been in the cross hairs of the bill, and they have already spent over $15 million attempting to challenge, influence and obtain an exemption from the law. Uber has suggested it will defy AB-5. And Uber, Lyft and DoorDash may fund a statewide referendum to cost upwards of $90 million. Court challenges will also come from many businesses and other organizations that do not support the law.

The fundamental issue at stake is how workers get classified by the state as either an employee (EE) or independent contractor (IC). AB-5 defines just that in very specific terms; and some people (mainly workers) are happy about that, and others (mainly businesses) are not (see Part 1 for more details on the law and its exemptions). Indeed, the stakes can be very high for businesses that rely on ICs (or who they thought were IC). But that’s just one side of the story — new laws and regulations that may cut into profits or even destroy some gig economy business models. There are other perspectives as well, such as workers and government, to name two.

In Part 2 of the series, we examine the competing interests and perspectives around AB-5. In Part 3, we will provide our own thoughts on the bill as well as point to potential implications for contingent workforce managers, HR and other executives.