Tag: independent contractors

Business legal services in Silicon Valley

How Proposition 22 Affects Independent Contractors in California

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On November 4, 2020, California voters passed Proposition 22 (“Prop 22”), which CNN describes as a “costly and controversial ballot measure to exempt firms like Uber and Lyft from having to classify their gig workers in the state as employees rather than as independent contractors.” Numerous businesses that will benefit from Prop 22 supported the measure, including Uber, Lyft, DoorDash, Instacart, and Postmates. In total, those companies put $200 million into the ballot measure, according to CNN, making it the “costliest ballot measure in California’s history.”

What do California business owners need to know about Prop 22 and how it will affect independent contractors in California?

What is Prop 22?

Prop 22 was known more formally as the App-Based Drivers as Contractors and Labor Policies Initiative, and it was designed to allow companies operating in the gig economy to avoid the “ABC test” in California. The ABC test, also known as Assembly Bill 5 (AB-5), took effect on January 1, 2020. That recent law, as you may know, makes it more difficult for a gig economy company to classify a worker as an independent contractor as opposed to an employee.

According to the California Labor & Workforce Development Agency, an employer must treat a worker as an employee (and not as an independent contractor) unless the employer can satisfy prongs A, B, and C of the test. The ABC test meant that many Uber and Lyft drivers, for example, would need to be treated as employees as opposed to independent contractors.

With the passage of Prop 22, both ride-hail (i.e., Uber. Lyft) and delivery drivers can be exempt from the ABC test requirements in order to be classified as independent contractors. Prop 22 does provide some employee-like protections to gig economy drivers who will be classified as independent contractors, such as a minimum wage guarantee., overtime pay, access to workers’ compensation, union rights, family and sick leave, or employer related benefits.

Can My Independent Contractors Remain in this Classification?

Businesses that have independent contractors and that operate through an app platform should consult with an attorney about whether their independent contractors can remain independent contractors in light of the new law. Many businesses still have independent contractors and do not currently comply with AB-5. Under AB-5, most of those independent contractors should be classified as employees.

Prop 22, voted in by Californians, shows hope for the gig economy. Many people like to operate businesses for themselves and to use independent contractors to provide services in California. Gig economy business owners, as well as other business owners in California, will need to wait and see if the legislature makes changes to AB-5 in light of Prop 22.

Contact a California Business Law Attorney

Do you have questions about how Prop 22 will affect the classification of your business’s employees or independent contractors? An experienced California business law attorney can speak with you today. Attorney Lynnette Ariathurai has been serving the Northern California business community for years and can provide you with the information you need. Our firm serves clients in Fremont, Hayward, Union City, Milpitas, and Newark.

gig workers, independent contractors, prop 22

Business legal services in Silicon Valley

Two Things to Consider When Starting a Software Company

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Starting a software company is an exciting enterprise. Tech folklore is full of stories of people building billion-dollar companies from ideas that were generated in their parents’ garage. The stakes are high. Successful ideas have made some people very rich. Poorly executed ideas have left other people in debt with unsurmountable financial losses.

corporate entity, employee compensation, independent contractors, software start-up, start a business

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Business legal services in Silicon Valley

New Supreme Court Ruling Impacts Companies with Independent Contractors

Companies desire to hire independent contractors rather than employees to save money on overtime pay, payroll taxes, and unemployment and worker’s compensation insurance, just to name a few benefits.  But are companies taking advantage by misclassifying workers? Ride sharing and food delivery are a few of the big industries that retain independent contractors, but also within the tech industry, companies can independently contract software programmers, graphic designers, digital marketers and pretty much any kind of service-based freelancer. With technology making our world more interconnected, independent work is only getting easier and therefore the need for an employer to consult with a labor lawyer is more important than ever.

A new court ruling is dramatically changing the rules for how to determine whether a person is an employee or an independent contractor.  So if you employ or are thinking about hiring independent contractors, our employment attorney can ensure you’re compliant with the most current labor laws. The Supreme Court ruling on April 30 (Dynamex Operations West, Inc. v. Superior Court of Los Angeles, No. S222732) is more clearly defining how workers are classified as employees or independent contractors.  In order to be considered an independent contractor, a worker must be ‘free from the control and direction of the hirer in connection with the performance of the work.’ Based on this ruling, workers whose employers are directly connected to their work (such as drivers connected to passengers through ride sharing companies) cannot be classified as independent contractors and rather should be considered employees.  This ruling seems to be directed at companies such as Uber and Lyft.

While companies save on financial obligations by retaining independent contractors, the legal responsibilities are crucial and penalties for misclassification can be severe. There are both civil and criminal penalties against companies and their owners/operators who wrongly classify an employee as an independent contractor.

Our full-service labor law office can not only help you understand whether any of your workers should be considered employees or independent contractors but can also ensure you have the proper contracts and documentation in place to retain your workers. With over 20 years of employment law experience, our labor lawyer is an expert in California labor laws.

Businesses in Fremont, Hayward, Union City, Castro Valley, Milpitas, or Newark, CA, can call to schedule a consultation with our employment attorney before hiring to understand how to legally employ independent contractors.

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Serving Businesses and Start Ups in the Greater Bay Area including Fremont, Hayward, Union City, Castro Valley, Milpitas, and Newark, CA.

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. Contacting us does not create an attorney-client relationship.