What You Need to Know About California’s Assembly Bill 5 (AB5)

California lawmakers recently signed Assembly Bill 5 (AB5) into law. It goes into effect on January 1, 2020. This new law makes it harder for companies to classify workers as independent contractors or freelancers. It also addresses the concerns that too many companies were hiring freelancers and independent contractors to avoid paying health insurance and other benefits.

Freelancers in America provide more than $1 trillion to the economy every year.  Now, many businesses are bracing themselves for the impact of AB5. As a result, thousands of freelancers have suddenly found themselves unemployed.

For example, Vox Media recently cut hundreds of freelance jobs ahead of the New Year in preparation for AB5. Decisions like this are likely to become more commonplace due to this new legislation.

What California’s Assembly Bill 5 Means for Labor and Ridesharing Companies

On September 18, 2019, California Governor Gavin Newsom signed AB5 into law, expanding the 2018 California Supreme Court “Dynamex Decision” that made it harder for companies to classify workers as freelancers.

Now, California Assembly Bill 5 requires companies to reclassify independent contractors and freelancers as full-time employees, making those workers eligible for benefits, as well as providing a guaranteed minimum wage and protection under the state’s employment laws.

For freelancers, this means that they are required to pay Social Security and Medicare taxes directly. They could also potentially lose many of their valuable tax deductions.

Of course, there are 20 different types of jobs that are exempt from this bill, including truck drivers, stockbrokers and artists. Even still, many of the individuals who relied on freelance work will find their income reduced in the New Year.

The new law does not mean that California freelance writers, photographers and editors will be out of work completely. AB5 does allow a company to hire these types of freelancers for 35 separate “content submissions” every year. For example, writers can bundle articles together and consider this a single submission.

Well-known ride-sharing companies like Uber and Lyft aggressively lobbied against this bill. These companies and others launched a $90 million campaign to put the referendum on California’s 2020 election ballots, offering voters a chance to give ride-hailing companies an exemption to the new law.

As part of this ballot, ride-hailing companies would agree to pay drivers at least 20 percent more than the minimum wage. They would also agree to pay 30 cents per mile to cover wear and tear on their driver’s vehicles. The ballot also requires ride-sharing companies to pay their drivers a small stipend to help them cover healthcare expenses.

What Are the Options Available to Employers?

If your business currently relies on a variety of California freelance workers and independent contractors, then it is important to understand how the new bill will affect your business. Many employers will be forced to make difficult choices to avoid violating the new labor law. Therefore, it is important to understand the bill and examine your current employment needs.

An experienced California employment law attorney can help you better understand California Assembly Bill 5. Your attorney will also help you analyze your business model and review any available options. Compliance with the new labor law is critical to avoid penalties and negative consequences in the new year.

Contact Our California Employment Law Attorneys Today

If you have questions about California’s Assembly Bill 5 or how it may affect you, then it is important to call a Modesto employment lawyer today. At Arata, Swingle, Van Egmond & Heitlinger, we have decades of experience helping California employees and employers with a variety of employment issues. Our team of experienced trial lawyers is ready to assist you. Call us today at (209) 522-2211 or fill out our confidential contact form for more information.