The state Supreme Court drew a line between employees and contractors, and now the issue is a hot one for the Legislature.
The term “gig economy” entered the popular lexicon a few years ago, referring to new industries that rely on technology and non-employee workers, such as the Uber and Lyft rides-on-call services.
In fact, however, hundreds of thousands, if not millions, of Californians work as “independent contractors,” ranging from emergency room physicians and movie actors to exotic dancers and truck drivers.
The line between those legitimately and voluntarily working as contractors and those who are being cheated out of even minimum wages and basic benefits has always been a little fuzzy.
Nearly a year ago, the state Supreme Court tried to draw a clear line, unanimously declaring in a case involving package delivery drivers that classifying someone as a contractor must pass a three-point test, dubbed ABC.
The most contentious, dubbed the “killer B” by employment attorneys, is “that the worker performs work that is outside the usual course of the hiring entity’s business.” Or to turn it around, if the work is the employer’s core business, the worker must be an employee.
Suddenly, the status of countless contract employees was in doubt, and employers worried about position-by-position lawsuits, potential retroactivity, and payment of back wages and payroll taxes.
Labor union leaders, meanwhile, celebrated. Union membership has been drifting downward recently and having hundreds of thousands of new payroll employees who could join unions was a welcome gift.
After the ruling came down, employers tried – and failed – to persuade legislators to put it on hold.
The issue is being joined again this year. Assemblywoman Lorena Gonzalez, a San Diego Democrat, has introduced a bill intended to lock the Supreme Court ruling into law and intense negotiations are underway among the affected stakeholders over what it will contain.
The conflicting positions were aired this week at an Assembly Labor and Employment Committee hearing with the ruling’s backers saying it will protect workers from being exploited by greedy employers, and business lobbyists saying it will force those voluntarily working as contractors to lose flexibility.
“It adds another layer of confusion for employers,” Jennifer Barrera of the California Chamber of Commerce told the committee.
One of the more bizarre aspects is the role of Stormy Daniels, an adult film performer who gained notoriety by claiming to have had an affair with President Donald Trump. Daniels, now a spokeswoman for a string of exotic dance clubs, wrote an article in the Los Angeles Times defending dancers’ independent contractor status.
“Strippers get naked and dance for our customers,” Daniels wrote. “It’s a sensitive profession. As independent contractors, we can perform when, where, how and for whom we want. If we are classified as employees, club managers would be empowered to dictate those conditions.”
During the hearing, her contention was echoed by representatives of other contract workers, such as emergency room physicians.
However, defenders of the court decision insist that it won’t affect voluntary flexibility.
“It doesn’t interfere with flexibility on wages and hours,” Gonzalez declared. Hastings Law School Professor V.B. Dubal agreed saying, “It just means you have the wage floor,”
Last month, another factor popped up. The Republican-dominated National Labor Relations Board reversed an earlier position and made it easier for workers to be classified as contractors and thus ineligible for union organization.
The conflicting rulings mean that a California worker could be an employee under state law governing wages and hours, but a contractor unable to join a union under federal law.
Sorting it all out will be a major chore for the Legislature this year.