CA Assembly Bill 5 is Law: Is the gig economy doomed? (Part 3)

Last week, with a stroke of California Gov. Gavin Newsom’s pen, CA Assembly Bill 5 (AB-5) became law and cast the gig economy into question. Did it doom the gig economy and its contract workers? And what does it mean for businesses?

Technically the law takes effect Jan. 1, but its future, nonetheless, remains uncertain for many reasons. And even if the law does not get watered down or blocked in the courts or overturned by state referendum, the jury is still out on whether AB-5 will deal a death blow to the gig economy or just change it. The signing of AB-5 “into law,” to a significant degree, marks the start of a new phase of debate and uncertainty about the question of whether a worker is an employee (EE) or an independent contractor (IC) and what the future of the “gig economy” — an ambiguous term if ever there was one — will be.

Earlier in this series, we referred to the gig economy as “an ecosystem of businesses and many types of workers” and governed by laws — “that part of the labor market where businesses, including online ‘gig platforms,’ engage workers as non-employees.” We believe this is the broader context in which this law should be analyzed (because, believe it or not, it’s not just “all about” Uber, et al, which represent just one segment of workers classified as ICs. According to our estimates, based in part on Beacon Economics report, “Understanding California’s Dynamex Decision 2018,” ICs make up about 19% of the California employed workforce of about 20 million workers (upwards toward 4 million ICs in the state). And over 90% are in industry segments other than “transportation.”

In Part 3 of this three-part Spend Matters PRO series, we will try to assume the business perspective and provide our thoughts on the newly passed law and the fate of the gig economy as well as point to potential implications for contingent workforce managers, HR and other executives.