Owning and running a business has a ton of factors that come into play for it to happen and work without fail. You have to think about utility expenses, stocks, prices, trends, and so on. Another factor that affects the industry is the concept of working with freelancers and independent contracting companies. Since a couple of months ago, there has been a significant change in terms of working with these entities. That would be what we know today as AB5.
Understanding AB5
AB5 or California Assembly Bill 5 or the gig worker bill is a legislation piece. It went into full effect back on January 1, 2020. With the mandate in place, California companies and organizations that hire independent contractors and freelancing individuals must reclassify them into formal employees. The transition is a must, although there are a few exceptions to it.
The ABC Test
A company must utilize a three-pronged test to prove that a worker is an independent contractor, not an employee. The company must bear the weight of demonstrating the independent contracting factor of an individual. To do that, an employer must show that a worker must have or pass all the criteria to become an independent contractor. These include the following:
- The worker is free from any direction, supervision, and control in performance and services.
- The worker must perform work outside the company’s standard course of business.
- The worker must be engaged in an independent trade, occupation, business concern, or industry.
Exemptions To AB5
The bill has exemptions for specific types of work, including the following:
- Licensed physicians
- Dentists
- Psychologists
- Veterinarians
- Architects
- Lawyers
- Accountants
- Engineers
- Brokers
- Security detail
- Investment advisers
- Real estate specialists
- Private investigators
- Human resources specialists
- Licensed manicurists
- Graphic artists
- Travel agents
While there are exemptions, workers must still undergo evaluation. They will take a multi-factor test.
How The Bill Affects Independent Workers
The pros
- The bill creates a level playing field for employees and gig economy workers.
- The bill also allows workers to have a minimum wage, employee benefits, and other benefits.
The cons
- There is a potential loss in terms of flexibility during work hours for reclassified workers.
- Workers might have issues adjusting to the new work circumstances.
- Reclassifying independent workers might cause some price changes for a lot of consumers.
How The Bill Affects Your Business
It will depend if you are currently or have plans to hire freelance workers or independent parties. You will have to consider:
- Your current workforce
- The benefits and other social securities of the transitioned workers
- The concept of paying minimum wage to your new workers
- Hiring costs
- Tons of paperwork
I Still Have Plans To Hire. Can Someone Help?
Help will surely come. It will be in the form of online companies and platforms that deal with work issues relating to freelance individuals and independent contractors. These services will take care of all the legal and stressful aspects of the job. They will do all of it, so you can focus on running your industry. In addition, these platforms will also educate you and your potential workers regarding issues and laws, including California’s AB5.
As A Conclusion
The bill is the cause of numerous changes in the state of California. The burden will be on the employer or company. They must comply with several mandates and regulations. If they do not, they might face legal issues in the long run, especially freelancers who claim to be regular workers. So what you can do is get the assistance of a platform or company that deals with such matters. Doing so will save you a lot of time, resources, and legal issues in the long run.
