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, gig workers, designers, therapists, insurance agents, accountants, financial advisers, consultants, writers, hair stylists, editors, drivers, and artists.

How does the California Supreme Court Dynamex decision impact the state?

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. The decision could upend how millions of Californians earn a living in nearly every industry in the state due to its new restrictive ABC test.

How does the Dynamex “ABC test” differ from what some other states are doing?

  1. The ABC test in the Dynamex case is one of the most restrictive forms of the ABC test found anywhere in the country. Some other states have an ABC test, but these states allow for more flexibility.
  2. 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.
  3. The Dynamex decision may apply retroactively, placing every business at risk of liability for a law they never knew existed.

What are the impacted industries?

Independent contracting is used across a variety of industries, which challenges the suggestion that independent contracting is something specific to emergent sectors of the economy, such as the gig economy. In California, the entertainment, professional, scientific and technical services, and real estate industries rely heavily on independent contractors. Source: Beacon Economics Study “Understanding CA’s Dynamex Decision 2018”

Do California independent contractors want to be employees?

No – 79 percent of independent contractors prefer it over traditional employment according to the Bureau of Labor Statistics Economic Release (June 7, 2018). Furthermore, in a California August 2018 survey, an overwhelming majority of individuals would opt to remain independent contractors rather than become employees. Only 7 percent of respondents say they would prefer to become an employee and no longer be classified as an independent contractor. Source: EMC Research August 2018

Why do California independent contractors prefer it over traditional employment?

  • 88 percent of California independent contractors consider the flexibility of hours to be an important aspect of their work. Source: EMC Research August 2018
  • 81 percent say the flexibility of location is important. Source: EMC Research August 2018
  • 65 percent say that the ability to do independent contractor work in addition to other work or attending school is important. Source: EMC Research August 2018

Are independent contractors replacing traditional employment?

No. In California, traditional forms of employment are growing far more quickly than the number of independent contractor positions. For example, in California over the period 2010-2016, five employees have been added for every independent contractor job. Source: Beacon Economics Study “Understanding CA’s Dynamex Decision 2018”

What is at risk if the Dynamex decision is not clarified or modified?

A wholesale reclassification of workers would have significant consequences for a variety of different sectors in the state’s economy. It would place millions of Californians into economic uncertainty and disrupt nearly every industry in this state. Since independent contracting varies by industry, a one-size fits all policy ignores the complexity and nuance of such work arrangements, and the value they bring to California’s economy. Source: Beacon Economics Study “Understanding CA’s Dynamex Decision 2018”

What can the Legislature do?

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. State legislators can review the significant differences in each industry and determine the best action.

 

We ask legislators to pass legislation that modernize our labor laws that preserve the flexibility for independent contractors while improving the quality and security of working independently.

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