Misclassifying employees as contractors allows companies to deny their workers benefits and protections.
It’s long been a controversial fact that gig economy companies, like many driving, delivery, and home cleaning services, are able to circumvent federal and state labor protections by misclassifying their workers as independent contractors rather than employees. This allows these companies to increase their profit margins by denying their workers, who are ineligible to unionize, important benefits like paid sick time, paid leave, and paid time off. A 2018 Federal Reserve reportfound that gig workers are far more likely to struggle financially than the average person.
A recent report released by the New Jersey Department of Labor & Workplace Development Authority suggests that this practice of misclassification is illegal, and “cheats workers out of benefits and wages, hurts law-abiding business owners, and costs the state tens of millions of dollars a year in lost employment-related tax revenue.” It’s clear that we need a solution to curtail these issues caused by the gig economy nationwide.
A proposed law in California, AB 5, would correct the problem in the state by creating clear standards for when a worker should be classified as an employee or an independent contractor. This would mean that the millions of workers for companies like Uber, Lyft, and Handy would be re-classified as employees and therefore covered by laws granting basic workplace rights in California, including anti-discrimination laws, minimum wage laws, and California’s paid sick time law — a statewide law that workers can earn up to 48 hours or 6 days of paid sick time per year, regardless of employer size — as well as local paid sick time laws in 7 California cities. AB 5 would also clarify when individuals are employees who are automatically covered by California’s paid family leave and temporary disability insurance laws, rather than independent contractors who have to apply for elective coverage.
In an ideal world, independent contractors and part-time workers would be covered automatically by laws granting workplace benefits and protections — there’s no reason why having a flexible schedule should be mutually exclusive with having basic rights. But since they are oftentimes not, the gig economy is fundamentally exploitative. Companies should not be emboldened to deny their own workers benefits and protections through this legal loophole, and AB 5 proposes an effective solution and would create a new standard for fair workplace practices for the millions of gig workers nationwide.