AB5. Heard of it?

Claire Williams | September 30, 2019

This month has proved monumental for California, which passed one of the biggest regulations for gig economies in the United States. AB5 is a California bill that will be focused mainly on making sure that employers of ride-share companies are compensated accurately for their position. It forces these companies to reassess if drivers are employees or independent contractors.

AB5 is scheduled to go into effect on Jan 1, 2020. The court has developed an ‘ABC Test’ that workers must pass to be classified as an independent contractor:

  1. Free from the control and direction of the hirer in relation to the performance of the work
  2. Perform work that is outside the usual course of the hirer’s business
  3. Customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hirer

Why is this important? There are an estimated 15.5 million independent contractors in the United States. Many of them are working for some of the biggest companies in the world: Uber, Lyft, DoorDash, GrubHub, Amazon, and more. This bill originated as a way to give these independent workers more consistent wages, employee benefits, the right to unionize and more.

The ripple effect from the passing of AB5 is unknown at the moment. It will most likely be focused around Uber and Lyft having to restructure their business models with their drivers to be able to keep up with the new requirements. This means that these companies will need to understand which of their drivers will be affected and what will happen specifically to the California ride-share market. 

While AB5 has passed only in California, other states and cities may begin to adopt the law as well, which would lead to a national change in the way that workers are treated and their employment status.

Similar to regulations like LIBOR, Brexit and CCPA, the final outcome of AB5 has yet to be seen. However, we do know it is coming. And the best way to prepare is to minimize disruption and start organizing new compliance now.

In the next few months, California companies are going begin massive reviews and overhauls of how their workers are classified. Identifying and organizing these specified workers alone will be an enormous task in it of itself, and this is where Heretik can help. Our contract review solution can quickly find all of these specified agreements and show who is affected and when.

Heretik allows users to easily identify individuals that are affected by AB5. Quickly filter out the California independent contractors from the contractors in other states and then further understand whose contracts need to be reviewed. 

Heretik provides the ability to get into the data sooner, so you are able to understand the different courses of action that are available to you. Interested in seeing what Heretik can help you accomplish? Click below to schedule a demo today!



Claire is a Marketing Coordinator at Heretik. She recently graduated from Miami University Ohio with a double major in Journalism and Mandarin Chinese. Prior to Heretik, Claire worked at Amdur Productions and for Miami University College of Arts and Science.​

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