I have said it before, California is special. But this new law may just screw a whole bunch of YouTube creators. Even if you aren’t in California you need to pay attention because this now exists in California, New Jersey, Massachusetts and Connecticut. It’s the growing trend and it will continue to grow in states across the US. As goes California goes the nation.
Last week California codified an existing California Supreme Court decision Dynamex Operations west, Inc. v. Superior Court of Los Angeles. This ruling changed the way that Independent contractors (sometimes called 1099) are classified. This new law will have far reaching impact on the intended industries as well as some unintended consequences that suck.
What’s the point of the ‘Uber Law’
Yes, AB5 is being referred to as the ‘Uber’ law because under the new test Uber is one of the biggest companies that will face sweeping changes classifying all drivers from independent contractors to employees. The thought of Ca. legislatures is that they are protecting individuals who work exclusively for one company from being exploited and not having benefits such as health care, unemployment etc. I am sure it has nothing to do with increased revenue from taxes paid to the sate when someone is an employee. What it means for companies like Uber is a 20%-30% overhead increase and likely an increase in rates in Ca., as well as a decrease in Uber drivers in Ca. But drivers aren’t the only industry impacted.
So what’s the ‘Test’.
California is now embracing what’s referred to as the “ABC” test to determine if someone is actually an Independent Contractor or if they are an Employee. The law, and court decision state that a person can only be classified as an independent contractor if all of the following are true.
- The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.