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Gig Economy Business Model Dealt a Blow in California Ruling (nytimes.com)
In a ruling with potentially sweeping consequences for the so-called gig economy, the California Supreme Court on Monday made it much more difficult for companies to classify workers as independent contractors rather than employees. The New York Times: The decision could eventually require companies like Uber, many of which are based in California, to follow minimum-wage and overtime laws and to pay workers' compensation and unemployment insurance and payroll taxes, potentially upending their business models. Industry executives have estimated that classifying drivers and other gig workers as employees tends to cost 20 to 30 percent more than classifying them as contractors. It also brings benefits that can offset these costs, though, like the ability to control schedules and the manner of work. "It's a massive thing -- definitely a game-changer that will force everyone to take a fresh look at the whole issue," said Richard Meneghello, a co-chairman of the gig-economy practice group at the management-side law firm Fisher Phillips. The court essentially scrapped the existing test for determining employee status, which was used to assess the degree of control over the worker. That test hinged on roughly 10 factors, like the amount of supervision and whether the worker could be fired without cause.
Will this change also affect contractors that were independent contractors long before this new gig economy trend? For example, if a family owned rug store offers to tell rug installing contractors about sales done that day (with the approval of the customer), are those contractors now under threat of becoming employees? What if the store offers to arrange the timing of the appointment for installation?
Your characterization doesn't hold. The right is also full of people who are dirt poor but still think their ship will come in. Meanwhile, there's some crazy wealthy people leaning left out there. Also a lot of people who work for a living that couldn't be called unsuccessful.
Most of the trap aspect of the safety net is the result of the right trying to push people out of the net before they're quite able to land on their feet.
This is one that I think is actually a challenge. Granted, the ruling only applies to CA DOL wage orders (effectively minimum wage plus a few associated items), but for my business we hire two very experienced mostly-retired engineers (72 and 77 years old). One of them goes away for a month or so at a time, and the other (older) one is easing into retirement. Both want flexibility, and it does provide each with a tax benefit. Neither wants any of our benefits, nor the pay penalty associated with them.
So, should they be part-time employees? The primary business part of the equation means yes if they work for us, but no if they work directly for one of our clients. This seems arbitrary.
A third person we work with just "retired," and does work for 5-6 other companies and likely well over 50 hours per week. Should he pay social security tax based on the base salary at each employer, or in aggregate as his own business?
It doesn't really impact me as an employer-- it is barely $200k of pay per year, and paying an extra $15k in payroll taxes isn't a big deal, but the contractor arrangement is what makes their expertise available in the first place.