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May 1, 2018 10:45 pm

Gig Economy Business Model Dealt a Blow in California Ruling

In a ruling with potentially sweeping consequences for the so-called gig economy, the California Supreme Court on Monday made it much more difficult for companies to classify workers as independent contractors rather than employees. The New York Times: The decision could eventually require companies like Uber, many of which are based in California, to follow minimum-wage and overtime laws and to pay workers' compensation and unemployment insurance and payroll taxes, potentially upending their business models. Industry executives have estimated that classifying drivers and other gig workers as employees tends to cost 20 to 30 percent more than classifying them as contractors. It also brings benefits that can offset these costs, though, like the ability to control schedules and the manner of work. "It's a massive thing -- definitely a game-changer that will force everyone to take a fresh look at the whole issue," said Richard Meneghello, a co-chairman of the gig-economy practice group at the management-side law firm Fisher Phillips. The court essentially scrapped the existing test for determining employee status, which was used to assess the degree of control over the worker. That test hinged on roughly 10 factors, like the amount of supervision and whether the worker could be fired without cause.

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