California Deals Major Blow to Freelancers: Why Millennials Could Be Negatively Impacted Elsewhere

A California Supreme Court ruling has dealt a huge blow to freelancers who participate in the gig economy. It unanimously ruled that contractors must be classified as full-fledged employees with all added benefits—a move would would increase a company’s expenses roughly 25-40%. US News puts it as a move that “would limit businesses from classifying workers as independent contractors who aren’t eligible for certain benefits and employment protections.”

With the Golden State being a petri dish whose results are experimented elsewhere across the country, we should expect similar things in our states.

What does this ruling entail? This court deliberated the question whether workers should be labelled as “employees” or “independent contractors” in relation to California wage orders relating to “minimum wages, maximum hours, and a limited number of very basic working conditions (such as minimally required meal and rest breaks) of California employees.”

Here’s a snapshot into the ruling:

Although in some circumstances classification as an independent contractor may be advantageous to workers as well as to businesses, the risk that workers who should be treated as employees may be improperly misclassified as independent contractors is significant in light of the potentially substantial economic incentives that a business may have in mischaracterizing some workers as independent contractors. Such incentives include the unfair competitive advantage the business may obtain over competitors that properly classify similar workers as employees and that thereby assume the fiscal and other responsibilities and burdens that an employer owes to its employees. In recent years, the relevant regulatory agencies of both the federal and state governments have declared that the misclassification of workers as independent contractors rather than employees is a very serious problem, depriving federal and state governments of billions of dollars in tax revenue and millions of workers of the labor law protections to which they are entitled.

Per Wired, the case only applied to delivery company Dynamex “but it sets a precedent that could affect many types of workers in California, including care givers, dog walkers, hair stylists, and, of course, drivers for Uber and other gig economy companies…” In relation to Dynamex, here’s what the stipulation over the classification was:

Prior to 2004, Dynamex classified as employees drivers who allegedly performed similar pickup and delivery work as the current drivers perform. In 2004, however, Dynamex adopted a new policy and contractual arrangement under which all drivers are considered independent contractors rather than employees. Dynamex maintains that, in light of the current contractual arrangement, the drivers are properly classified as independent contractors.

As the gig economy begins to take hold in this country, freelancers are met with a important questions going forward: should they support partisan politics or rulings which will regulate them out of existence or limit their employment opportunities?

I’ve written about the benefits of the gig economy here at my blog and I still stand by my support of it. There are many net positives to this burgeoning sector of the economy, and big government policies are out to undermine this.

50 % of Millennials are participating in the gig economy. As Deloitte notes,  “a study predicts that 42 percent of all self-employed individuals in the United States are likely to be millennials by 2020.” Here are six trends they note in relation to Millennial gig economy participants:

1. The proportion of women in the millennial alternative workforce is shrinking, possibly because more millennial women than men are going back to school.
2. The proportion of household income millennials receive from alternative work is increasing.
3. Most alternative millennial workers make less than their traditional full-time employed counterparts.
4. Millennial alternative workers are often supported by someone else in their household.
5. Alternative millennial workers are more likely to find jobs in the arts, maintenance, and administrative professions.
6. Alternative millennial workers appear to be more likely to break the rules, have emotional agility, and work hard.

Those figures are astounding.

If more rulings like that witnessed in California are to take hold, Millennial freelancers will be the hardest hit. As a fiercely independent, autonomous bunch, Millennial freelancers won’t like this ruling as it’ll make them more bound to those who contract work for them. How can Millennials support certain policies that would run them out of existence or make it harder to administer their business? I urge my fellow Millennial entrepreneurs to study these rulings and advocate for less invasive policies emanating from the legislative or judicial branches

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