In 2020, the way small businesses employ freelance workers has changed. Due to Assembly Bil 5 (AB 5), California Governor Gavin Newsom said that the new law “will help reduce worker misclassification — workers being wrongly classified as ‘independent contractors’ rather than employees, which erodes basic worker protections like the minimum wage, paid sick days and health insurance benefits.”
The change is set to affect millions of workers, as it’s estimated in California, 1.6 million people have freelancer businesses as their full-time work. As for business owners, they will be fined if they continue hiring freelancers without actually hiring them as employees (there are many exceptions to this, depending on business type, etc.)
According to the LA Times, California’s bill is arguably the strongest of its kind in the nation, giving the state and cities the right to file suit against companies over misclassification, overriding the arbitration agreements that many businesses use to shield themselves from worker complaints. The new law’s supporters point to audits conducted by state employment officials that found almost 500,000 workers were wrongly treated as independent contractors. Much of the early legislative debate on the bill centered on low-wage sectors of the California economy.
“As one of the strongest economies in the world, California is now setting the global standard for worker protections for other states and countries to follow,” Assemblywoman Lorena Gonzalez (D-San Diego), the author of AB 5, said in a written statement.
Not all businesses are on board yet, though. Many feel the law chokeholds the “gig economy”, forcing freelancers to leave the state to continue operating their independent businesses. On the flip side, proponents of the bill argue that AB5 is necessary to k