Uber and Postmates Attempt to Block California’s New Freelancer Law

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Postmates, popular app-driven delivery start-up, and Uber, the famous app-driven ride-hailing company, seek an injunction against California’s new freelancer law, effective January 1, 2020. The two companies filed a lawsuit in California federal court hoping to prevent the landmark freelancer law set to go into effect for 2020.

Why Did Uber and Postmates Attempt to Block California’s New Freelancer Law?

The attempt to block Assembly Bill 5 accentuates the fact that the stakes are high for gig companies in California. The new law threatens gig economy business because it requires companies to classify workers as employees rather than independent contractors when certain conditions exist.

When Does Assembly Bill 5 Require Employers to Classify Workers as Employees?

The new “freelancer law” poses a significant threat to California businesses that operate using freelancers rather than employees. Companies are required to classify workers as employees under the following conditions:

  • If a company controls how the worker performs their work or

  • if the work performed by a worker is a regular part of the company’s business.

How Does the New Law Affect California Businesses?

Experts expect the new law to cause drastic changes at Uber, Postmates, and other similarly structured businesses as they will need to classify their California drivers as employees. This change would add an estimated 20-30% additional labor costs (or more) for Uber and its primary competitor, Lyft. This type of restructuring could end up costing them hundreds of millions of dollars through increased expenses to comply with California’s new freelancer law.

When California workers are classified as employees by their employer, they are entitled to protections under FLSA and California labor law. The protections provided by labor law protect against wage and hour violations, overtime violations, etc. Classification as an employee also means workers are eligible for unemployment insurance and workers’ compensation with the employer required to pay half of the employee’s Medicare and Social Security payroll taxes.

If you have questions about California labor law violations or how California’s new freelancer law may change your workplace, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in any one of various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.