Independent Contractors Affected by New Laws

Employment Law Update – New Laws for Independent Contractors

A new freelance law to protect California independent contractors recently went into effect and a similar law could be coming to New York State.

AB 5 establishes several new requirements for California companies working with freelancers. The law is an indication of what’s on the horizon for businesses in the ever-growing “gig economy” with more companies working with independent contractors than ever before.

New Law Requires Employers Prove Worker is an Independent Contractor (IC)

AB 5 is intended to protect ICs and comes as a result of concerns over workers being exploited due to their status as independent freelancers.

Now, according to AB 5, instead of a worker having to prove he or she is an employee and not an IC, the burden of proof will be on the employer to prove the work is an IC if it intends to deny that worker the benefits provided to employees.

This must be done in three parts that include:

• Proving the person is “free from the control and direction” associated with employment
• Prove that the person performs work that is not within the normal course of the business
• Prove that the person is engaged in “an independently established trade, occupation, or business of the same nature as that involved in the work performed.”

It’s expected the new requirements will result in many ICs being re-classified as employees, thus becoming eligible for benefits, minimum wage protections, and unemployment insurance.

It should come as no surprise that many companies that work with ICs, including Uber, Lyft, Doordash, and Postmates are against the changes and are fighting to overturn the law. The companies have expressed concerns that the law could force them to lay off thousands of workers and potentially sink their business model altogether.

The New York Times reported the companies even pledged $90 million in support of a ballot initiative that would exempt them from the law. The National Press Photographers Association also filed a lawsuit against California claiming the new law is unconstitutional.

Though many people working for these companies are in support of the changes because it would give them access to employee benefits, others are concerned it would decrease the flexibility they currently enjoy. Some people choose to do these jobs specifically because they are not employees and don’t need to answer to an employer. But when companies begin to take advantage of workers, the benefits of being an IC soon fade.

New York City Offers Protection to ICs and Freelancers

Though New York State does not have a similar law in place, it could soon. And New York City does already provide many of the protections found in AB 5 to independent contractors under its Freelance Isn’t Free Act.

Under the Freelance Isn’t Free Act, New York City ICs enjoy the strongest payment guarantees in the nation. Freelancers can file a lawsuit if a client doesn’t fully pay their contract on time and receive penalty payments in addition to what they are owed.

The law also protects from retaliation. You can learn more about the Freelance Isn’t Free Act via this information from NYC Consumer Affairs.

New York also recently extended workplace discrimination protection to ICs.

No matter how long it takes for New York State to enact new laws addressing the quickly evolving gig economy, workers deserve protection no matter their status. If you have questions about your status as an IC or you believe you have been misclassified and you’d like to speak to an employment lawyer someone, contact New York employment attorneys Borrelli & Associates, P.L.L.C. to schedule a free consultation.