In a blow to Uber and Lyft, a California appeals court said Thursday that the companies must reclassify their drivers as employees rather than independent contractors, affirming an earlier court decision. The ruling marks a significant development in a months-long legal fight between the ride-hailing companies and the state of California.
Are gig workers employees or independent contractors? This court ruling may have significant ramifications for incorporated workers who will be caught between two worlds.
As I have previously written, on the surface, it looks like the states are trying to do right by workers. The proposed regulations seek to gain “basic protections,” such as minimum wages and unemployment and disability insurance coverage, but these two lawsuits don’t do any carve-outs for other kinds of gig workers.
However, if you are an incorporated contract worker (engineer, consultant, or freelancer of any kind), you already carry worker’s comp and disability insurance for yourself, and you already have other business insurance policies required to be a contract worker. If the state requires you to be treated as an employee, you will either lose control of your P&L and your tax returns, or you will be doubly taxed and doubly insured. Your deductible expenses would become reimbursable expenses (if allowed by your employer), etc. This is a hot mess, and it is super counter-productive for both contract workers and the businesses they serve.
There is absolutely a place for this kind of regulation at the low end of the pay scale, where unskilled workers do contract work and unscrupulous business owners try to save a few bucks by keeping the workers off the books. Without a specific carve-out for skilled incorporated contract workers, though, this is a direct attack on the gig economy, and it will be a crushing blow to skilled freelance workers.
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Author’s note: This is not a sponsored post. I am the author of this article and it expresses my own opinions. I am not, nor is my company, receiving compensation for it.