For those wondering why it’s so hard to find a middle-class job or agonizing over rising income inequality, pay attention to a new California bill that tackles those issues — by taking aim at the gig economy in a way that could drastically change the face of precarious work.
The legislation means companies like Uber will no longer be able to exclude workers in California from basic rights like minimum wage by calling them independent contractors, a category that has no protection under workplace laws. And in Ontario and beyond, labour advocates are watching closely.
“In terms of the changing labour market and workplace today this is probably the biggest issue for precarious, non-standard workers,” said Mary Gellatly of the Toronto-based Parkdale Community Legal Clinic, “because employers are increasingly looking at how to shift their liability or responsibilities for work being done.”
California’s Assembly Bill 5, approved Tuesday, is the most significant blow yet to employee misclassification, which worker advocates have long described as the bedrock of the gig economy. The practice sees companies categorizing workers as self-employed to evade workplace protection obligations, workers’ compensation premiums and payroll taxes. While it’s popularly associated with businesses like Uber, which steadfastly maintains its drivers are not employees, the practice is also common in sectors like cleaning, construction, nail salons and courier services.
Now, at least a million Californian workers in these fields could become employees with the right to minimum wage, unemployment and disability insurance, paid sick days and family leave.
Lawmakers wrote the impetus for the new protections into the bill’s text.
“The misclassification of workers as independent contractors,” the legislation reads, “has been a significant factor in the erosion of the middle class and the rise in income inequality.”
David Doorey, Associate Professor of Work Law at York University, calls the bill “potentially a watershed moment.”
“For ‘gig’ companies, it will require a fundamental rethinking of how their businesses operate. The bill rejects entirely their operating premise, which is that they are just technology companies that link service providers to customers. The bill places gig companies in the position of an employer and all that entails in terms of legal compliance and human resources practices,” he said.
Ride-hailing companies like Uber and Lyft and DoorDash, a food delivery firm, have opposed the measures arguing that they would compromise worker flexibility and inflate operating expenses.
In 2017, an extensive report by two independent experts to the Ontario ministry of labour described misclassification as having a “significant adverse impact” on workers here too, and recommended that the problem become “a priority enforcement issue” for government.
An estimated 12 per cent of Ontario’s 5.25 million workers are independent contractors with no paid employees of their own.
The report said a portion of those workers “are misclassified as they are actually employees,” based on the ministry of labour’s experience and “significant anecdotal evidence.”
That’s because misclassified workers, especially those in vulnerable or low-wage jobs, often don’t know that their job doesn’t meet the test of an independent contractor. True independent contractors are defined under the law as people who are in business for themselves, stand to make a profit or loss as a result of their work, control the terms and conditions of their work, and have the power to subcontract out some of the work to others.
Employee misclassification is illegal in Ontario, but right now, it’s up to workers to prove their case by filing complaints to the ministry of labour. California’s bill is radical because it flips that obligation and assumes all workers are employees, unless businesses can prove otherwise.
In response to the 2017 report, Ontario’s previous Liberal government passed legislation that required employers to prove they hadn’t misclassified a worker when complaints were filed — a significantly paler version of California’s new legislation. Premier Doug Ford’s Progressive Conservative government has since reversed the measure.
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Given that, Doorey said he doesn’t anticipate California’s legislation will create “any immediate spillover effects” closer to home. But the bill is still a significant bellwether, he said.
“We are witnessing early tremors in a coming seismic shift in law that will eventually refocus social protections on economic vulnerability and precarity,” he said.
There are other testing grounds for the gig economy too, although none so sweeping as California’s legislation. In Toronto, for example, Foodora couriers are challenging their employment status through a union drive. The Ontario Labour Relations Board is currently deciding whether the workers are independent contractors with no right to unionize, as Foodora contends, or not.
With a federal election underway, Gellatly hopes political leaders will commit to replicating California’s legislation federally. Although most workers in Canada are governed by provincial labour laws, some sectors like trucking — where misclassification is common — are regulated by Ottawa.
“Work is work,” she said. “And people should have basic protections.”