Ruling Could Turn California Gig Economy Giants’ Contractors Into Employees

Uber and Lyft and other similarly situated gig-economy companies are lobbying for Californian democrats to override a recent court ruling that could require them to reclassify their independent contractors into employees. The April ruling was handed down by the California Supreme Court. The far-reaching ruling could make it significantly harder for companies across the industry to claim their workforces are not eligible employees under state wage laws.

Hoping to blunt the ruling’s impact, businesses are urging California political leaders to take action in their favor through legislation or executive action by the governor. Either move would make noise across the national debate regarding rights and roles of workers in today’s gig economy. The businesses affected by the ruling insist that it is stifling innovation and threatening the livelihoods of California workers. They seek a balance between the need for flexible, scalable work arrangements and the rights of California workers and that the definition and implication of said definition should not be simply left to the courts or determined based on old models.

In addition to many popular gig-economy businesses, the California Chamber of Commerce has been quite outspoken in opposing the new requirements indicating that the business model of today’s gig-economy companies does not lend itself to the strict structure of a traditional employer-employee relationship. The chamber argues that forcing this on the companies leaves them in an impossible position and prevents them from continuing forward with their business model. The chamber is attempting to get a legislative fix before the session closes at month’s end. Without this type of fix, they feel entire sectors of California’s economy would be left in jeopardy. As is – without a legislative fix of some sort – the on-demand economy may no longer be a viable business model, which could be devastating as people depend on it.

The California Labor Federation reiterates their support of the ruling and insists they will resist efforts to suspend or reverse. Their stance is based on record highs of income inequality and the millions of working families struggling to make ends meet in what has become an unfair economy. They feel protecting California’s workers should be the top priority of California’s leaders rather than protecting big corporations.

If you have questions about minimum wage, overtime pay, or other employee rights provided by federal and California laws, please get in touch with one of the experienced employment law attorneys at Blumenthal Nordrehaug Bhowmik De Blouw LLP.

Employers Reclassifying Workers to Save Money

July 16, 2015 -Courts and regulatory agencies are increasing the scrutiny coming at employers regarding the relationship with their workers: businesses and independent contractors, contractors and subcontractors, employers and employees. In response, many employers are utilizing different tactics to classify their workers; reclassifying workers to save money by taking them off formal payroll and lowering costs. 

For years, employers have shifted work off their actual employees and on to independent contractors. This relabeling of the workforce with slight alterations to their work conditions left many in court or owing settlements. As this misclassification of employees as independent contractors is receiving such intense focus across industries, many businesses are now turning to other types of employment relationships:

Setting up Workers as Franchisees

Setting up Workers as Owners of LLCs

Both of these methods help to shield the business from tax and labor statutes that are attached to the formal payroll for actual employees of the company.

These new tactics have state and federal agencies aggressively putting a stop to the setup: passing local legislation to address the issue, filing briefs in worker’s lawsuits, and closely keeping an eye on the increasing popularity of what regulatory agencies see as an equally questionable alternative to the independent contractor employment model that has experience such a crackdown.

As employers are finding it more difficult to save costs by avoiding an official payroll, workers are finding that they are required to assume more risk. They suddenly need to shoulder more of the burden for health care premiums, retirement income and even job security. This shift in responsibility from the employer to the worker seems to be spurring the major influx of misclassification suits and allegations.

Employers are seeking more creative ways to misclassify workers. If you feel that you are misclassified or you need to discuss the issue of misclassification with a southern California employment law expert, contact an employment law attorney at Blumenthal, Nordrehaug & Bhowmik.