A California law taking effect in January will change the standard for classifying workers in that state as either independent contractors or employees. But don’t expect Missouri to follow suit, according to Pauline Kim, a law professor at Washington University in St. Louis who specializes in workplace law.
“There’s no reason (Missouri) couldn’t do it as well, theoretically,” Kim said. “Whether there’s political interest and political will, I haven’t seen it.”
The California law, officially called Assembly Bill 5, or AB5, is frequently referred to by names like “the gig economy bill” or “the Uber law.” It aims to address who is an employee and who is an independent contractor. However, Diane Mulcahy, author of the book “The Gig Economy,” said the law adds to uncertainty over worker classification.
“Whether you’re talking about the federal level or the state level, worker classification is unclear,” she said. “It’s vague. It’s subjective. And it’s not clearly defined.”
The legislation, which Kim said is driven by “inequality and low-quality jobs,” is sparking interest in states beyond California. Massachusetts already has a similar bill on the books. Lawmakers in other places, like New York, have voiced public support for similar measures to be taken up.
In Missouri, no bills addressing gig economy laborers have been pre-filed ahead of the 2020 legislative session.
California’s new law
The California law will establish a stricter standard than the Internal Revenue Service classifications for workers, affecting workers including delivery drivers, drivers for ride-hailing services and contract construction workers.
Twenty-eight states, not including Missouri, currently use a test called the “ABC Test” in some form to determine whether a worker is a contractor or an employee. The test, which has three legs to it — hence the ABC name — states that for a worker to qualify as independent, they must be free from control by the employer, do work that is outside the usual course of business by the employer, and be engaged in an independently established business.
Under current California law, gig economy workers are not considered employees of the companies they work for. That means they don’t receive benefits or workers’ compensation and they’re not covered under minimum wage laws, the Upjohn Institute for Employee Research noted in a November brief.
The new California law will “make it more difficult for companies to avoid paying their share of Social Security, Medicare, and unemployment insurance taxes and avoid providing state workers’ compensation insurance,” according to an Economic Policy Institute Fact Sheet published in November.
“In most of the instances, (gig economy workers) are effectively self-employed or not employees,” said Susan Houseman, vice president president and director of research at the Upjohn Institute.
Opponents of the law say it will reduce workers’ flexibility, which some say is a crucial reason some workers take independent contractor jobs. For instance, 92% of Uber drivers drive less than 40 hours per week, and 45% drive less than 10 hours per week, Uber executive Tony West said during an earnings call in September. If drivers were to become employees, he said, this would change drastically.
Could it happen here?
California’s new law may alter the way companies like Uber and Lyft, which are headquartered in California, will operate. But a change in California should not affect drivers for those ride-hailing companies working in Missouri.
“In theory, it wouldn’t have any effect at all on drivers in Missouri who are not covered by any of those California laws,” Kim said.
The question then becomes if contract-heavy companies like Uber and Lyft will alter their business models substantially. While it is still too early to tell which direction those companies will go with their operations, Mulcahy said the most likely answer is that the companies will not reorganize.
“The reason I say that is because the same law has been on the books for 10 years in Massachusetts, and it hasn’t had a major impact,” Mulcahy said. “So for California to pass the law and assume it’s going to have a major impact seems optimistic to me.”
Drivers like Nicole Nixon and Suzette Grosz, who both work for ride-hailing services in mid-Missouri, said flexibility was a key reason why they started driving.
“I for one started Uber for the flexibility, so I just jump on when I have time, and jump off when something comes up with my kids,” Nixon said in Facebook message.
Grosz echoed Nixon’s comments, saying flexibility was a big reason she drives for the services.
Sarah Peters, a ride-hailing driver based in the St. Louis area, voiced opposition to Missouri adopting any measure like California’s new law.