Under the Microscope: AB-5 is a Mixed Bag

There’s a whole lot of ruckus going on in the Golden State.

California just approved Assembly Bill 5, which specifically targets the gig economy and app-based companies. Under this measure, independent contractors who are working for such companies would be re-classified as employees and become eligible for minimum wage, benefits, pay guarantees, and union memberships in certain sectors. On-demand service providers such as Uber, Lyft, and DoorDash are adamantly against it and have been from day one. The trio have each contributed $30 million to support a 202 ballot that would enable them to keep their drivers as freelancers.

What does this mean for the industry? Our Director of Research and in-house gig economy guru, David Francis, shares his thoughts.

At stake is whether a tech ‘platform’ must also ‘employ’ the people that find work/transact through said platform.

Some already do employ the workers on their platforms (e.g. BlueCrew, Trusted, Snag), though most don’t and these are the ones that will likely be hit hard with higher operating costs, compliance issues, and employment liabilities. The Ubers of the world will most likely survive because they have the cash to litigate and ride out the storm, but for many smaller players it will be tough or impossible to absorb the financial and legal burdens.

AB-5 will likely be a boon to those firms that have already built employment into their business models, a significant challenge that must be addressed for those that have not, and maybe the beginning of a “great reckoning” for app-based work platforms. From the workers’ point of view, most will likely celebrate the law as it offers new benefits and protections.

That said, not all workers are excited and one unintended side effect of AB-5 may be that it makes it harder for people to participate in the gig economy at all, and thus shrinking the total ‘economic pie.’

What do you think? Email your thoughts to hello@talenttechlabs.com. Want to learn more about the gig economy? Click here to download the latest Trends Report– Remote Work Platforms.