AB5: How companies and freelancers can navigate California’s law

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AB5: How companies and freelancers can navigate California’s law

  • California Assembly Bill 5 (AB5) requires company workers to be considered as employees, with some exemptions. Hirers must now use an ABC test to prove that workers are independent contractors. 
  • The law can have adverse effects on businesses and freelancers in California, as new regulations change who can be hired and the amount of work they can submit to remain contractors. 
  • AB5, which went into effect on January 1, 2020, impacts how companies like Uber and DoorDash manage workers who are currently recognized as contractors.
  • Uber, Lyft, DoorDash, and other companies have since resisted changes and created Proposition 22, a November ballot measure that would allow them to continue classifying their drivers and delivery workers as contractors. 
  • Business Insider regularly covers legal changes that affect how you work. You can read them all by subscribing to Business Insider.

California Assembly Bill 5 affects how companies recognize people who work for them. Better known as AB5, the bill tightens the definition of “independent contractor” and requires employers to conduct ABC tests to determine whether or not their workers should be classified as full-time employees.

The bill minimizes the amount of work that can be conducted by freelancers and contractors without being considered full-timers. The intention is to prevent employers from taking tax shortcuts and provide workers who should be classified as employees with healthcare, workers’ compensation, paid time off, and other rights.

Uber, Lyft, and other contractor-reliant businesses that operate in California now have to classify their drivers and delivery workers as full-time employees instead of contractors. Ridesharing and food-delivery giants have resisted orders from the state, coming together to create and fund Proposition 22, a November ballot measure that would exempt them from AB5 requirements. 

But there are some exemptions: Below are some references to help ensure that you and your business are in compliance with AB5. 

For business owners: How companies can best navigate California’s Assembly Bill 5 if they consistently work with independent contractors or freelancers

For freelancers and contractors: California’s Assembly Bill 5 doesn’t just impact Uber drivers and delivery workers. Here’s how freelancers and contractors can navigate the law and remain independent.

For anyone not sure what an ‘independent contractor’ is: What an independent contractor actually is and how it’s classified under California’s Assembly Bill 5, the gig worker law Uber, Lyft, and others are fighting with a November ballot measure

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