The Gig economy is the industry that covers part time jobs offered on as needed basis, like Uber and Lyft. There are upsides and downsides to these types of jobs – both for employers and employees. These types of positions are reasonably new and as more jobs like these enter the market, regulations – including insurance rules - are changing. Whether you are an insurance agent, an employer, or an employee, here’s what you need to know…
For years, Uber drivers have been fighting unsuccessfully for a status change. Drivers in California want to be reclassified as employees rather than as independent contractors. The small status change would have enormous implications, not just for Uber, but also for Lyft drivers, Instacart shoppers, and other companies that rely on this gig economy filled with independent contractors.
Last month, the California Assembly passed a bill known as AB5. This bill makes it harder for companies to classify workers as independent contractors instead of employees. The bill now goes to the Senate.
If passed, businesses will have to use the ABC model to determine whether a person is an employee or an independent contractor. In short, the ABC model states, to hire an independent contractor, a business must prove the person is: • free from the company’s control • doing work that isn’t central to the company’s business • operating an independent business in that industry If the worker doesn’t meet all three conditions, they must be classified as an employee.
Workers who are reclassified as employees would suddenly be entitled to labor benefits that do not apply to independent contractors. That’s why companies like Uber are fighting it. They don’t have to offer independent contractors unemployment insurance, health care subsidies, paid parental leave, overtime pay, workers’ compensation, or a guaranteed $12 minimum hourly wage.
If California AB5 passes the Senate, it will reflect a significant turning point in the post-recession economic expansion. California is the largest state economy in the US and home to an industry where lawmakers influence national politics. In other words, if it passes in California, it will probably spread to other states as well.
There’s also the possibility of adding a new classification. Some will argue that gig workers don’t fit into either category, employee or independent contractor.
With emerging technologies, we’ll likely see new jobs popping up that we haven’t yet considered. Computers and technology allow for companies of all sizes to hire people remotely to do jobs from their own homes by their own schedules. So, to meet the needs of these workers, laws will need to be enacted to tackle their concerns about workers’ compensation, health care, and bargaining power in this growing economy.
It can be tough to tackle these kinds of challenges. At Normandy Insurance, we’re here to explain to you what these new laws and lawsuits could mean for businesses, employees, and independent contractors. Call today if we can answer any of your questions.