The so called gig economy, in which many people in our nation work as independent contractors and move around from gig to gig, has been a classic example of free market success - it has improved the lots of workers and companies, and it has improved the overall economy. Gig workers have vastly increased their autonomy and flexibility; they have a lot of control over the type of work they do, how much of it they do, when they do it, and where they do it. Companies have been freed, at least to some extent, from the heavy burdens of employment regulations. Services are being delivered, people are making money, both workers and companies are freely making their own decisions about what's best for them, and the overall economy is benefitting. Wealth is being created. The pie is being grown bigger. As free and fair markets always do, this has produced a win-win-win. But now, California, in typical heavy-handed fasion, is seeking to kill another goose that has been laying all these golden eggs.
In April 2018, the California Supreme Court, in the Dynamex ruling, undermined its own previous decisions by changing the rules - and vastly broadening its reach - regarding reclassifying designated independent contractors to employee status for certain employee rights under California law. It implemented the "ABC Rule" to replace the prior framework, which was much more nuanced and much less onerous for companies. Under the new ABC Rule, California law presumes independent contractors should be reclassified as employees, unless the hiring company, which carries the burden of proof, can prove all three of the following:
- Autonomy of Worker - the worker is free from the control and direction of the hiring company in the performance of the work;
- Business of the Company - the work performed by the worker is outside the ordinary business of the hiring company; and
- Customary Business of the Independent Contractor - the worker is customarily engaged in the type of work or business he or she is performing for the hiring company, and the worker regularly provides similar services to other customers.