Local independent contractors on Thursday called on state legislators to hit the pause button on enforcement of a recent California Supreme Court decision they fear may severely limit their job prospects.
Bonita Smith, who said she drives primarily for Uber and Lyft, said that the freedom of being an independent contractor has allowed her flexibility while caring for her son and having a disability.
“I’m really really fearful of that because I have tried to work in the traditional work setting in the past couple of years, but it’s been darn near impossible with the level of my disability,” Smith said at a press event hosted by the Long Beach Area Chamber of Commerce. “Being with ride share companies that may now have to restructure themselves to have me become an employee—it’s become an unknown. How’s that going to work?”
The April decision in Dynamex v. Lee by the state’s Supreme Court established a statewide “ABC” test for enforcing state wage laws, which critics say has shifted the burden of proof on employers to prove that employees are in fact independent contractors. The ruling is separate from an ongoing battle between port truck drivers and their employers, where allegations of misclassification and wage theft have persisted for years.
The 82-page ruling sided with delivery truck drivers who sued Dynamex Operations West, a national package and document delivery company, over their classification as independent contractors. The company did not employ other drivers during a single pay period, nor did the drivers work for another company other than Dynamex. Prior to 2004 Dynamex had classified all drivers as employees but shifted to the independent contractor model that year.
The judge ruled that workers who meet certain requirements should qualify for benefits that full-time employees enjoy, adding that companies who employ independent workers have a competitive advantage over other businesses.
But if Lyft or Uber were forced into categorizing drivers as employees, and adopting more rigid business structures including a work schedule, Smith said she might be squeezed out by the fact that it’s difficult for her to commit to certain time slots as a single mother.
“What happens if you continue to tell your employer that you can’t do X, Y, and Z?” Smith asked.
Long Beach Chamber President and CEO Randy Gordon said the court’s ruling is now forcing many small businesses and workers to adopt the employer-employee business model.
He warned it could strip away the incentives of creating new sectors of business and dissuade future entrepreneurs from starting up. Gordon added that many businesses are going to make up the difference by paying employees less to balance the added costs of providing benefits.
“We need a stop or a pause so we can study the economic impact of this because the economic impact is going to be much more severe than anybody realizes,” Gordon said.
Under the ABC test, a worker is considered an independent contractor if the person is free from the control and direction of the employer, performs work that is outside the usual course of the business, and if the worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed by the hiring entity.
For instance, under the ruling, a driver for Uber of Lyft, both ridesharing companies, may have to be classified as an employee because the business relies on a contractor shuttling patrons around in cars. Uber and Lyft are part of a group, including local chambers of commerce, petitioning lawmakers to push for amendments to the ruling.
Dr. Mark Futernick, a practicing emergency physician in Downtown Los Angeles, said the ruling could have negative impacts on the healthcare network.
Physicians, he said, can moonlight at other hospitals working as independent contractors. But if employers are forced into hiring them as employees, the industry could see more hospitals go the route of institutions like Kaiser and university hospitals that require employees to sign non-compete clauses prohibiting them from working at other hospitals.
“We already have a huge physician shortage, so we need every physician we can get in a sense,” Futernick said. “It’s only going to get worse. The population is getting older so we actually need more physicians than we have.”
Marco Silva, co-owner of Silva Sons Transport, who works in the aggregate construction waste hauling industry, said his American Dream has been shattered. Silva recently attained his engineering license in July, which means he can hire sub-contractors to help carry out portions of jobs but he fears the new legislation will strip him of that ability and require him to bring them on as regular employees.
Silva said the ruling unfairly impacts small businesses; his business has been family-owned for three decades.
“It makes a monopoly out of the entire industry,” said Silva, referring to bigger businesses that have the capital to retain contractors as employees. “Those with the deepest pockets will be able to control everything because, if the only way for me to not worry about getting sued, as the decision says, ‘hire everybody,’ which means that I will have to be able to do everything in house.”