AB5 limits access to independent contractor status ^75%

The Freelance Economy Faces a Reality Check: AB5 Limits Access to Independent Contractor Status

In recent years, the gig economy has experienced explosive growth, with millions of people turning to freelance work as a way to earn a living. However, this trend may be coming to an end – or at least, it's facing significant challenges – thanks to California's Assembly Bill 5 (AB5). Signed into law in September 2019, AB5 has major implications for anyone working as an independent contractor.

What is AB5 and How Does it Affect Freelancers?

AB5 aims to reclassify many workers who are currently considered independent contractors as employees. This means that companies would be required to provide benefits such as health insurance, paid time off, and a minimum wage. The law applies to businesses with five or more employees, and there are several industries that are exempt from the new regulations.

How Does AB5 Determine Employee vs. Independent Contractor Status?

To determine whether a worker is an employee or independent contractor, AB5 uses three key factors:

• Borello test: This test examines the degree of control the company has over the worker's work.
• Specially skilled workers: Workers who are highly specialized in their field may be considered employees if they're working for a company that's not in their industry.
• Business-to-business relationships: If a worker is providing services to multiple companies, they may be considered an independent contractor.

What Does This Mean for Freelancers?

For many freelancers, the shift from independent contractor to employee status could mean significant changes. They may lose flexibility and autonomy over their work schedule, as well as have to adhere to stricter rules and regulations. On the other hand, they would gain access to benefits and protections that are currently reserved for employees.

What's Next for Freelance Workers?

As AB5 continues to take effect, it will be interesting to see how this new law impacts the freelance economy. Some entrepreneurs may choose to reclassify themselves as employees in order to gain access to benefits, while others may explore alternative business structures or even move out of California altogether.

Conclusion

The implementation of AB5 marks a significant shift in the way companies hire and classify workers. While it's understandable that businesses want to ensure their employees are treated fairly, this new law could have far-reaching consequences for freelancers and entrepreneurs who rely on independent contractor status to make a living. As we move forward, it will be crucial for policymakers to balance the needs of businesses with those of workers in order to create a more equitable and sustainable freelance economy.