After a period of uncertainty and ambiguity which lead to some public demonstrations and vociferous lobbying, some clarity has now been achieved when it comes to legislation relating to the use of independent contractors in the state of California.
This period of confusion in relation to the use of contractors in the state was finally settled, in theory, when Assembly Bill 5 became law in California.
The law is designed to oversee a transitional process where businesses will be required to reclassify independent contractors who work for them as regular employees, with all the benefits and rights that accompany that employed status.
However, it appears that the intended line in the sand that has been drawn as a result of Bill 5 being written into law is not as clear or final as intended, with a number of high-profile technology titans refusing to take the ruling lying down.
Exceptions to the rule
The new law has had a fairly seismic impact on Silicon Valley and there are some large corporations such as Uber and Lyft, for instance, who have built their business around recruiting independent contractors rather than having them directly on the payroll.
Not surprisingly, these companies are amongst a number of industries and business sectors who are looking to persuade lawmakers that their type of business and occupation warrants special consideration and should be exempt from the new law.
You should expect to see some aggressive lobbying on behalf of a number of specific industries that believe they have a valid case for being excluded from the new ruling.
The financial implications
It is not just from a bureaucratic perspective that companies are objecting to the introduction of Assembly Bill 5, there are also some major financial considerations in play as a result of the new law.
The bottom line is that hiring workers as employees rather than independent contractors adds considerably to a businesses labor costs and by the time you add in the cost of Medicare and Social Security you could easily be adding up to 30% to the cost of hiring someone for your business if you have to employ them directly.
There is a persuasive counter-argument that supports the necessity for Assembly Bill 5 which is founded on the view that huge companies have managed to avoid their responsibilities as an employer for too long.
If you are an independent contractor and not an employee you won’t enjoy the same levels of workers’ rights and other protections or benefits that come automatically with the status of being an employee.
An independent contractor does not have the ability to join a union, for instance, as federal laws restrict this from happening.
Working without this basic level of protection might suit some independent contractors who want to enjoy a reasonable amount of flexibility and freedom with their work options and hours but they might change their mind if they get sick and don’t get paid for being off work.
The new law could potentially put an end to contractors in California but this is a scenario that is not going to happen without a major fight.