Recent California Uber IC referendum does not affect small biz.

Uber and Lyft funded a ballot referendum in November’s election that exempts them from a recent state law classifying most workers as employees instead of independent contractors (ICs). The referendum passed by a wide margin.

Changes in IC v. employee classification in one state are often a bellwether for firms in other states. But in this instance, most other employers do not benefit.

The referendum narrowly applied to companies that employ drivers through apps. When certain conditions are met, those companies can treat the drivers as independent contractors.

Other employers in California still must classify most workers using the ABC test, the test used in various versions by most states, which requires employers to prevail on tests A, B and C for a worker to be treated as an IC, as follows:

A.  The worker must clearly be free from the hiring entity’s direction for the work, both in the terms of the contract and in the conduct of the relationship.

B.   The worker does work that is outside the hiring entity’s usual business—e.g., truck drivers who work for a trucking company do not do work outside the scope of the hiring entity’s business, so they are employees. A plumber doing work at a retail store is performing work outside the hiring entity’s usual business.

C.  The worker must be customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

 

Works Cited

Bookkeepers, A. I. (2021). Recent California Uber IC referendum does not affect small biz. The General Ledger, Vol. 38, No. 1.