Who are independent contractors and freelancers?

Today, nearly 2 million Californians are choosing to work independently, either full time or to supplement their primary income. These include freelancers who work in the most dynamic sectors of the state’s economy, such as engineers, software developers, designers, therapists, insurance agents, accountants, financial advisers, consultants, writers, hair stylists, editors, drivers, and artists. In fact, nearly half of all millennials currently freelance.

With the advancement of innovation, this diverse California workforce will have even more opportunities to choose independent work in the near future. According to a survey commissioned by Upwork and the Freelancers’ Union, more and more people will continue to choose independent work.

Why are the livelihoods of nearly two million Californians at risk?

On April 30, 2018, the California Supreme Court issued its decision in Dynamex Operations West v. Superior Court and departed from nearly 30 years of established California law. By implementing an unprecedented, one-size-fits all, judicially-created standard to differentiate contractors from employees, the Court effectively undercut nearly two million workers’ freedom to choose independent work as a way to support themselves and their families. This would not only impact the millions of Californians who choose to work independently but would have a chilling and harmful impact on our communities and economy across the state.

What does the court decision actually do?

In Dynamex, the California Supreme Court abandoned a long established balancing-of-factors test previously adopted by the Court in a 1989 decision: S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations (“Borello”). This approach weighed nine different factors in their totality to account for the variety of California industries and professions, as well as diversity of California’s workers. Under Dynamex, the Court presumes that a worker is an employee unless the hiring party establishes all three of a one-size-fits all test. This test, referred to as the “ABC” test has never before existed in California. It is both the most restrictive form of the ABC test found anywhere in the country, and the Dynamex decision marks the first time in U.S. history that any form of the ABC test has been imposed by a court without any legislative approval.

What are the impacted industries?

Industries that commonly utilize freelancers include healthcare, education, financial planning, agriculture, beauty, creative fields (filmmaking, editors, writers), technology development, insurance, construction, on-demand marketplace, truck owner-operators, and transportation. In addition, the franchise business model is based on an independent contractor relationship between a franchisor and franchisee. California has over 76,000 franchise locations that support nearly 730,000 jobs.

Why do Californians choose to work as freelancers, versus traditional employment?

The top reasons that motivate individuals to pursue independent work include: 1) to be their own boss, 2) to choose when they work, 3) to choose their own projects, 4) to choose where they work, and 5) to earn extra money. Whether to pursue an education, care for their families, or adopt to a preferred lifestyle, many Californians prefer the flexible schedule and other opportunities that freelancing provides. In certain professions, it is also beneficial to work for multiple firms on multiple projects, or to change firms frequently to increase economic stability. Californians are choosing to work full-time as independent contractors and others are using the opportunity to supplement their income.

In fact, 79 percent of independent contractors prefer it over traditional employment according to the Bureau of Labor Statistics Economic Release (June 7, 2018). A 2017 survey also found that a majority of freelancers who left a full-time job made more money within a year.

What can the Legislature do to protect Californians’ right to choose their work and livelihood?

The Legislature, not the courts, should be responsible for crafting statewide policy. The Dynamex decision is the first time in U.S. history that such a test has been imposed by a court, without legislative approval. The court was limited in the information it considered in its decision, but the Legislature is not. The Legislature can suspend the decision and adopt a more reflective approach of today’s modern economy that protects workers as well as their freedom to work independently. If the Legislature stands by, the court case would destroy the work opportunities on which millions of Californians depend.

We need the time to have a robust legislative discussion on the best approach to modernize our independent contractor laws focused on balancing worker protections and worker choices.

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