The ABC test

On September 11th California lawmakers passed a bill that changes the criteria for what classifies as an ‘independant contractor’.

The employer has to be able to prove 3 things to be able to classify workers as independant contractors as opposed to employees:

  • The worker is free from the control and direction of the hirer in relation to the performance of the work, both under the contract and in fact;
  • The worker performs work that is outside the usual course of the hirer’s busines
  • The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hirer

This is what Uber drivers have been fighting for, they want to be classed as employees.

But this will have a big negative impact on the gig economy. The gig economy is how many startups have managed to move & scale at speed, creating work, lots of it.

On the flip side, traditional businesses will be pleased as it will help level out the playing field.

California just grievously wounded the gig economy.

But Assembly Bill 5, the California bill that was approved by the state Senate on September 10th, is only the beginning of a long fight over the relationship between gig companies like Uber and Lyft and the drivers they employ. While it is likely to become law — it still needs its amendments to pass the Assembly, but once it reaches the desk of Governor Gavin Newsom, he will sign it — the real fight is what comes next.

Uber and Lyft will try to staunch the bleeding by doing what they do best: spending obscene amounts of money. The companies say they will fund a ballot initiative in 2020 to ask voters to approve the creation of a new category for ride-hail drivers. The enforcement of the law will present a range of obstacles for state regulators. And drivers will still face tough hurdles before they can achieve their ultimate goal: the formation of an independent union.

A domino effect is not just possible, its all but guranteed.


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