How can a person work for a company but not be considered an employee? It happens all of the time, and it limits the non-employee's pay and benefits. It can even affect how much he or she has to pay in taxes. A bill currently being considered in California will change employment classifications of certain workers so they can start collecting fair pay and benefits packages, as well as potentially lower their tax liabilities.
Called Assembly Bill 5, if passed by the Senate, it would give new guidelines for determining who is and who is not technically an employee. It enforces the use of the ABC test. The ABC test looks at:
- A: If an individual works independently
- B: If an individual works outside of an employer's regular operations
- C: If an individual's job is essentially and independently established trade
If one's employment fits within these guidelines, he or she will be considered an independent contractor. This means he or she will be unable to collect certain benefits and is unable to claim certain employment protections. A prime example of this is rideshare drivers with companies like Uber and Lyft. Currently, they are treated as independent contractors, though certain aspects of the jobs would technically make them employees. Under AB5, these drivers can change their relationships with their employers, making them eligible for employee classification and all the benefits that come with it.
If AB5 passes, employers will have to start making changes. If they do not, they will be held accountable for improperly classifying employees and denying them the protections they deserve. California residents who believe that their employers have misclassified their employment status do not have to wait until AB5 becomes law. With the assistance of legal counsel, such issues can be addressed now and fair and full compensation sought.