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Growth in technology, the desire for flexible lifestyles, and the goal of reducing work-related stress have contributed to the rise of what is commonly known as the “gig economy,” in which individuals perform freelance, contract or temporary jobs. As much as a third of the working population is already participating in the workforce in this manner rather than pursuing traditional full-time work for employers. While a “gig” employment arrangement has benefits for both an employer and a worker, it also raises larger questions about the responsibilities of the employer and rights of the worker.

In response to the tremendous growth in the gig economy over the last fifteen years, California lawmakers passed Assembly Bill No. 5. In theory, this measure was designed to protect a gig worker’s right to minimum wage, unemployment insurance and paid leave. In practice, it means that employers of gig workers are still required to contribute payroll taxes and pay premiums for workers’ compensation, Social Security, unemployment and disability insurance to the State of California.

Despite passage of Assembly Bill No. 5, two major employers of gig employees, Uber and Lyft, have continued to treat their drivers as independent contractors. In response, California’s Attorney General and the cities of Los Angeles, San Diego and San Francisco filed suit against Uber and Lyft alleging violations of the law. Uber and Lyft argue that their businesses are “multi-sided platforms” or “matchmakers”, rather than transportation companies and application of the law would harm their drivers by decreasing their flexibility to set their own hours. Though they have not said as much, application of Assembly Bill No. 5 would also harm the bottom lines of Lyft and Uber by requiring huge payouts of taxes and premiums.

So far, the Court appears to agree with the State. It issued a preliminary injunction to prevent Uber and Lyft from misclassifying their drivers as independent contractors, prompting the companies to threaten operational shutdowns pending appeal of the injunction. Last month, the Court granted a stay of the preliminary injunction pending the appeal process. While the parties to this litigation would have people believe that this fight is about workers’ rights, it actually just appears to be about taxes. Which issue is more important to voters will become clearer in November when Proposition 22, exempting certain businesses from Assembly Bill No. 5, is on the ballot.


This article is informational only and meant to provide guidance. It is not meant to be legal advice and it does not create an attorney-client relationship. For what to do in your specific situation, please consult with a qualified Construction Law attorney.


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Classic Refrigeration Company

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Clarion Construction, Inc.

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The Patterson Company

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