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This problem of legally differentiating between employees and contractors has been around for a while and relates to multiple factors so it is informative to look at this in contextual terms. This arrangement has become known as the "ABC Test". There is a good summary of what it means at The Balance Small Business: https://www.thebalancesmb.com/what-is-the-abc-test-for-indep... and discussion of adoption of this test by the California Supreme Court at the California Public Agency Blog: https://www.calpublicagencylaboremploymentblog.com/wage-and-....

To attempt to summarize in a way that answers your questions: First do you know how to do the work and use your own expertise to adapt to circumstances or do you follow specific direction, training, and escalation procedures as dictated by management? If you are following a script as trained and have someone overseeing you as you work then you are an employee. If you know what to do and get only summary instructions then you are likely a contractor. Second, if you are hired by a cleaning company to extend their cleaning capacity using their methods and equipment then you are likely an employee, but if you are hired by a software company to sweep their floors whenever they get really dirty then you are probably a contractor. Finally, if you do cleaning on your own for various clients and are hired to do cleaning then you are likely a contractor, but if you clean for one client by their instruction and with their oversight and support then you are probably an employee. Note that each of these criteria has substantial wiggle room and the idea is they all work together to support a decision one way or the other.

From your second example... that sounds like it’s going to affect construction workers too... a lot of contractors just hire construction workers day to day to expand their workforce. Would that become illegal or is it different in construction?

A lot of what contractors do in hiring day labor and paying them cash under the table is already illegal. I don't think this bill would change that.

If yes, is this not a good a thing? Part-time employees are not significantly different than contractors in terms of benefits owed so it's not a major cost for that use case. And if you're working full-time for somebody, don't you deserve the benefits everybody else gets?

Yes and no.

This will force companies to hire more employees, true, but at the cost of a much smaller overall workforce. Remember that cost is a constraint for businesses.

Depends what is more valuable from a human + capitalism perspective, fewer work opportunities that pay better or more competition and “starter/flexible” work overall.

> but at the cost of a much smaller overall workforce.

That's what people predict about minimum wage increases too. Yet the effect has always been smaller than predicted, sometimes even non-existent.

> And if you're working full-time for somebody, don't you deserve the benefits everybody else gets?

I'd argue that if you deserve benefits like everyone else.

Especially ridiculous is the situation some people I know of are in. They are working two or three part-time jobs because they can't find a full-time position. The places that employ them have many part-time positions, and fewer full-time positions. And these people don't get benefits.

So you've got people who are working 40+ hours a week, for employers who have enough hours to work to have full-time employees, but instead have part-time job openings instead.

All so that the employers don't have to pay for benefits.

I would guess it's because their labor is not worth minimum wage plus all the extra overhead costs of a full time employee. It's people trying to get by despite stupid price controls that don't reflect reality.

And because we've tied health care to employment directly. If only we wanted to have affordable health care for everyone...

A general contractor's area of business isn't exactly doing construction, it's the project management aspects. Talking to vendors, organizing work crews, acquiring specialized labor from various trades, communicating project information to various stakeholders, etc.

It's a subtle distinction, but one that I suspect would survive legal scrutiny.

If that's true, then I would argue that Uber and Lyft are contractors not workers:

> First do you know how to do the work and use your own expertise to adapt to circumstances or do you follow specific direction, training, and escalation procedures as dictated by management? ... If you know what to do and get only summary instructions then you are likely a contractor

Surely Uber drivers already know how to drive. I'm not sure whether they're under obligation to follow GPS instructions.

> Second, if you are hired by a cleaning company to extend their cleaning capacity using their methods and equipment then you are likely an employee, but if you are hired by a software company to sweep their floors whenever they get really dirty then you are probably a contractor.

The Uber driver uses her own equipment although you could argue that they use Uber's methods.

> if you do cleaning on your own for various clients and are hired to do cleaning then you are likely a contractor, but if you clean for one client by their instruction and with their oversight and support then you are probably an employee

In my experience, almost every single Uber I've been in drives for Lyft as well.

I think the sticking point for Uber is

> the person performs work that is outside the usual course of the hiring entity’s business

It’s hard to say that offering rides is not Uber’s core business. There might be an argument that Uber is just a matching service, but that’s an argument to make, not self-evident.

This sort of stuff is happening a lot in construction and cleaning services as well. If you run a business, the people that do the core part of your business should be considered employees, or else all of labor law becomes pointless.

> I'm not sure whether they're under obligation to follow GPS instructions.

UberX, no, the GPS is a suggested route. UberPool, yes, you have to follow the GPS as instructed.

> The Uber driver uses her own equipment although you could argue that they use Uber's methods.

This is where I tend to agree, with caveats. A rideshare driver is a contractor. But when it comes to compensation Uber and Lyft want to act as an employer. Currently, compensation has been trending down to the point it's becoming a unprofitable for the driver. A contractor would be able to negotiate a rate saying, "I'll drive for $0.55/mile." What we currently have is an email to all "contractors" stating the rate starting today is X/mile. That sounds more like an employer notice than a contract negotiation.

Do contractors always really get to negotiate? All the contractor jobs I’ve seen have had take it or leave it fixed rates. I think negotiation is only possible at the high end, not for low end devs or cleaners or construction workers.

Every contract job I've ever done had a negotiable rate. Obviously in some cases they say 'I can't go higher than this', and then you say no. That's part of any negotiation: The implicit assumption that either party will just decide to end negotiations. That is not part of driving for Uber or Lyft because everyone gets offered the same rate, there's no negotiating up/down. It becomes 'take it or leave it', just like being an employee where once you're hired there is no negotiation involved.

In a few cases my contract negotiations actually involved choosing between hourly or weekly, with differences in effective pay based on overhead for both me and the employer.

I thought that both Uber and Lyft change their rates (surge pricing) when they want to attract more drivers? Then it seems more like a task auction related to supply and demand (drive now for X, drive later for X+).

> What we currently have is an email to all "contractors" stating the rate starting today is X/mile.

By that logic all taxi drivers are employees of the cities of their medallion, because cities set the taxi driver rates.

Actually it goes beyond just setting the rates. The state sets the rules. The state can "fire" drivers. Managing transportation is core to what government does. According to the ABC criteria, they should qualify as state employees with all the ensuring benefits and it would be hilarious if all taxi drivers in California sued the state to become state employees just like bus drivers and train operators.

I don't know about other states but in mine there is no medallion. You can start a T&L company today if you wanted to. You only need to read up on the state and local certifications, rates, livery, and vehicle requirements. Most of the taxi drivers I've used are actually employees of a T&L company.

So you can't subcontract? That's often within the same industry

This seems like it will affect government and corporate "on-site" contractors more than software-routred cabs.

Unintended Consequences, arriving.

Individual government on-site “contractors” are almost entirely W-2 employees of firms that are contracted by government. That's often, though perhaps not as consistently true, of BigCorp onsite contractors, as well.

There will be no impact to those at all.

So if one wanted to drive flexibly for a software-routed cab company under the proposed California regume, could one set up an LLC and then contract through the LLC?

Yes, probably.

That is actually how most (sub)contractors in the construction world currently have things set up for legal reasons.

If anyone is looking for a startup idea, there's probably some merit in setting up an LLC-as-a-service business so those individuals impacted by AB5 that do want the flexible work can continue to do so without much headache.

> To attempt to summarize

Correct me if I'm wrong, but you're summarizing the ABC Test. The question here is, what does the new labor bill mean?

Or is it the case that the new labor bill is "just" an embodiment of the ABC Test. If so, please state that clearly. I don't get that right now from your comment.

The new labor bill puts the ABC test, which is currently in case law, into statute.

In my country, if you earn 80%+ of your income as a contractor from a single company (with some limitations), you're labeled as dependant contractor, and special rules apply (eg: they can't just break a contract, they must give notice first, etc).

This is a good distinction that more countries should adopt. As usual, technology and business has changed faster than the law. Seems like the employee/IC dichotomy is too blunt of a distinction nowadays.

This sounds like a good classification, and I would hope along with it would come corresponding taxation policies. Here in Canada there are many "small businesses" which are incorporated single persons getting paying the miniscule corporate tax rate, with various tricks to avoid income tax (paying spouses, drawing dividends, investing in 'corporate' assets which aren't, etc.) while drawing their income primarily from a single source (often a corporation or charity they are personally associated with.)

When the gov't made noises about small business tax reform people screamed bloody murder and they had to climb down. Which only shows you how pervasive this kind of 'contracting' as tax avoidance actually is.

Similar thing seems to be going on here in the UK.

I must admit that I don't know enough of both situations to say much.

There seems to be quite a bit of vitriol online about the rule changes in the UK though.

I do remember reading the rules when I became a contractor a few years back and thinking: Ok, so I'm inside IR35, going to use an umbrella company as it's simpler. Was told that i was a fool and contract was outside IR35. As far as I could tell, nobody meet, or indeed, could meet the substitution clause.

I think it means that contracting can't be a part of a company core business model - as is in the case for uber, lyft, or cleaning services.

Examples of a contractor here would be: hiring a third-party graphic designer for a few months while you ramp up hiring at a startup.

The law says AND. You need to comply with all three conditions.

So, you would also need to be sure that they were:

>free from control and direction of the hiring entity in connection with the performance of the work

And:

>person is customarily engaged in an independently established trade, occupation or business

i am not a lawyer but ive been a hiring manager for a while so ill give you my understanding.

> free from control and direction of the hiring entity in connection with the performance of the work

An independent contractor should be free to work when, where, and how they want. IE, you can't demand a contractor show up from 9-5 at your office, wearing a company uniform, and following employee policy.

> the person performs work that is outside the usual course of the hiring entity’s business

for example, a company that sells software, might hire a contractor to update their online advertising. The company doesn't sell online advertising or have any expertise in it, and they don't have a need for a full time position for online advertiser.

this one is going to be interesting for uber and lyft. right now, they identify and brand themselves as a ride sharing company. So rides ARE their business model. They might, for example, be able to pivot into a software company that licenses their ride-hailing software to drivers (who are license the software to help run their own independent businesses), then maybe they can get around this after some work. but right now its appears that drivers work for uber and lyft to deliver services to Uber/Lyft customers.

> person is customarily engaged in an independently established trade, occupation or business

this is the most straight forward of them all. If an IC provides their services, the same service, to more than one company, that's a good indication that they are running their own business and not working as an employee for another. Here, Uber and Lyft actually benefit from each other because a lot of drivers drive for both Uber and Lyft. Thats why we've seen both uber and lyft drop their exclusivity arrangements with drivers in recent years.

As far as controlling and directing the performance of work, that means how they do the work itself. Requiring them to use certain tools, resources, or techniques, for instance.

You can ask them to dust, but can’t order them to dust a certain way. Of course you can make requests - don’t use cleaning product XYZ because I’m allergic, don’t dust the China because it’s too fragile, etc. But I suppose at some point it could be argued that too many such requests cross over into essentially supervising how they dust.

I think you’re right about contracting out for help. If you have employees already, and then you expect another person to join in and operate just as an employee would, why wouldn’t they also be considered an employee? I’m sure there could be some loopholes however.

I think an example would be for companies like Google who hire a lot of contractors from hiring agencies who do work at Google, but these people don't technically work FOR Google and therefore don't get the good Google salary or good Google benefits. I guess that is counter to Uber who hires their own people and basically contracts them out to themselves? I don't know if that means the easy loophole for Uber and Lyft is just to now hire all drivers from a separate company and then call them contractors.