Assembly Bill 5: The Battle for Independent Contractors in California and the Potential Effects on Workers’ Compensation

‍

Recently, the August 21st deadline passed for companies, such as Uber and Lyft, to reclassify independent contractors as employees. This deadline was initially ordered by the California Court of Appeals pursuant to Assembly Bill 5 (AB 5), which went into effect on Jan 1, 2020.  As we all know first-hand, Californians have come to rely on ride-share giants Uber and Lyft, and in our current COVID-world, UberEats, Doordash, and other gig-services provided by independent contractors.
‍
Both Uber and Lyft threatened to suspend their California operations until there was resolution of their case challenging AB 5. It seems as though they were playing a game of chicken with the State of California on the issue, knowing the value of such services to California consumers, particularly in a COVID world. However, it appears California was not backing down, knowing it has a large consumer market that the companies covet as well as a long-standing value of upholding employee rights. But alas, the head-on collision between the two was temporarily averted as the appellate court granted temporary reprieve delaying the August 21st deadline for reclassification until later this year. So, for the time being, Californians can continue to enjoy the services provided by the independent contractors of the ride-share giants.  However, the issue of classification--and the resulting consequences to our labor and employment segment--is still looming.

‍
If the drivers are reclassified as employees they would be entitled to benefits in California, including minimum wage, unemployment, and of importance to us, workers’ compensation benefits. This could result in an influx of workers’ compensation claims filed against ride-share companies in California by their drivers who have (as all of us have) been significantly impacted by the pandemic. Alternatively, if Uber and Lyft refuse to reclassify their drivers as employees and decide to halt California operations, it could mean a blown head gasket for the ride-share industry, at least in the Golden State.

We have yet to hear an official unified voice from the drivers--who likely enjoyed their freedoms of being independent contractors in a pre-pandemic world--but now may be suffering from the snail-paced COVID slow down. They may now prefer the benefits and protections afforded to employees in the state of California. It will be interesting to see what is in store for the drivers and the impact on workers’ compensation as a result of the ongoing litigation between the ride-share giants, independent contractors and AB 5.

--Elliot Pease and CB Everett