Gig Economy Businesses May Soon Have To Provide Minimum Wage, Benefits To Workers

By Steve Goldstein
Published: Tuesday, September 24, 2019 - 12:20pm
Updated: Tuesday, September 24, 2019 - 2:42pm

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STEVE GOLDSTEIN: The so-called gig economy could be deeply affected — especially ride share drivers — by California Governor Gavin Newsom's decision to sign AB5 into law last week. It would compel a number of companies and industries — though there are some exceptions — to give employment benefits like minimum wage and vacation to those who are currently classified as independent contractors. With me to talk about what California's doing and whether Arizona may follow suit is Phoenix labor law attorney David Selden. So David what is California trying to do with this change?

DAVID SELDEN: To make it more difficult for businesses to provide services by engaging independent contractors to provide those services and instead have those persons be deemed to be employees. And that would then trigger a whole host of legal effects because employment is regulated by all kinds of statutes — whether it be minimum wage, workers compensation, unemployment compensation and all the discrimination laws and everything else, health care mandates. Everything that attaches a cost to an employee is avoided, generally, in independent contractors. So because of that, a lot of businesses — and the ride shares are probably most common example. It's often referred to as the "gig economy" of people who are providing services not in a traditional employment model. And the California law will curtail that by making it much more difficult for those people to be considered independent contractors rather than employees.

GOLDSTEIN: There are a number of exemptions or a number of areas of employment that don't want to be included in that. What do you think about that, and could that lessen the overall impact? Certainly Uber and Lyft are two examples — we presume their costs are going to go way up. Does it make sense to you that there would be exemptions carved into this?

SELDEN: Yes, because a lot of industries are different. In a lot of situations, the individual workers want to have the flexibility to choose when they want to work, who they want to work for, to take an assignment or not take an assignment. And the gig economy provides that flexibility, which is particular attractive to younger people just based on lifestyle things. But I give an example if you'd like of a of a business that exists and it can exist only in a gig economy basis. Consider all the amateur sports that we have — Little League games, Pop Warner football games, youth basketball leagues, youth soccer leagues, even recreational leagues that the city has in the city parks — all those amateur sports games require umpires or referees. There are a few businesses that operate as kind of a clearinghouse to marry the availability of people who are qualified to be umpires or referees with the schedules of what those leagues need. So what will happen is one of these businesses will have the contract with a certain kind of Little League, for example. So the Little League will give the little business a schedule. Here's all our games for the year. Here's where they'll be. Here's what time will be. That business may have 200 people that have qualified to be a referee or an umpire, and they'll put out the schedule and say "OK folks, here's the schedule. Sign up for what you want." And they get $20, $30 a game — whatever it is. So they elect which ones to do, sign up the schedule, fill the schedule, great. Several years ago the Arizona Department Economic Security took the position that those little mom and pop businesses that ran the website to match up the referees with the businesses, those were the employers of those referees and umpires. So they would have had to have taken out wage withholdings. They would have had to have provided workers compensation insurance in case one of those guys ran into a base runner or whatever, sprained an ankle. You know nobody really should quarrel with that being filled on a gig economy basis. So the legislature actually passed an exception and said for these kind of amateur sports leagues, those people are independent contractors, not employees, when they go out and be a referee.

GOLDSTEIN: Well so does that fall into the dreaded phrase "unintended consequences," and how concerned would you be that there might be some of those to come? I mean, is is this still sort of a work in progress as we learn more about the gig economy and how it works?

SELDEN: Very much so. Because this is evolutionary. This is a very — it's a changing field, and in fact one of the things that occurred in the aftermath of that, and Gov. Ducey's office — Gov. Ducey signed the bill, he is a supporter of the gig economy — but they've also said "We really don't want to clutter up the Arizona statutes with industry-by-industry exceptions." So in the last several years, the legislature has taken a crack at this in Arizona, taking a different approach than California but has tried to bring some clarity. And so we have a very different legal environment in Arizona than California has and really gone in a different direction than this new law in California.

GOLDSTEIN: Considering how different Arizona's laws are at this point, California tends to be — even though it's certainly more progressive than Arizona in its politics — California in some way sort of sets the tone for whether the incremental change or incremental progress, some would say, when it comes to these things. So is Arizona sort of set in terms of what it is doing in terms of the gig economy, or could you see the California shift influencing Arizona in anyway?

SELDEN: I think Arizona will probably benefit from the differences between its legal environment and the California legal environment. And just because California has done this with their new law to try to curtail the gig economy, I don't see that causing that same effect in Arizona because of the different philosophy in the part of the prevailing view in the legislature and the governor. And there's lots of other aspects of California law that are different than Arizona law. And at times, that helps drive the Arizona economy because we have businesses from California relocating to Arizona to take advantage of the more favorable legal environment here.

GOLDSTEIN: That is labor law attorney David Selden of the Cavanagh law firm.

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