Gig Economy Expected to Suffer Largest Blow
Delivery drivers brought a class action alleging the company's misclassification of drivers as independent contractors violated provisions of the California wage order governing the transportation industry, as well as various sections of the Labor Code, and resulted in unfair and unlawful business practices. The court addressed the standard applicable under California law deciding whether workers should be classified as employees or independent contractors under state wage orders, which impose obligations relating to minimum wages, maximum hours, and a limited number of basic working conditions (such as minimally required meal and rest breaks) of California employees. The California high court adopted the “ABC” test to classify a worker as an independent contractor. First, the employer may not be able to control or direct the work by contract or in practice. Second, the work must be outside the company's usual course of business. Third, the worker must be engaged in an independently established trade, occupation or business. The court put the onus on the hiring entity to establish contractor status and will consider factors like whether the worker has a business that is incorporated or licensed, advertises its services and offers services to the public. Employment experts foresee a major impact on the Gig economy, interpreting this decision as precluding anyone who is a driver in a ride service (i.e. Uber or Lyft) or a delivery person (i.e. GrubHub or DoorDash) from being categorized as an independent contractor.