CA’s Gig Law Sparks New Need for Business Agility

Following in California's footsteps, every state could potentially adopt its own law regulating companies' use of gig workers.
David McCannJanuary 3, 2020
CA’s Gig Law Sparks New Need for Business Agility

January 1 was more than just the beginning of a new year and decade. It also signaled the opening salvo in what could be a long and protracted battle over new state laws regulating America’s growing “gig” economy.

Part of what the World Economic Forum calls the “Fourth Industrial Revolution” — where technological convergence is creating an economy that’s faster, more dynamic, but also less predictable — what gig work’s future will look like is only now beginning to emerge. This much is for sure: companies need to watch these developments carefully and be agile in how they respond.

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With Congress unlikely to legislate gig work anytime soon, state governments are instead filling the void by writing their own rules. And, as expected, California already has an early lead. On the first day of this year, the Golden State’s AB5 legislation, forcing employers to classify many independent contractors as full-time employees, became state law.

Sacramento’s primary intent was to reclassify ride-share drivers as full-time employees with benefits and protections, instead of their previous classification as part-time workers without. But in their desire to move drivers from 1099s to W-2s, the state legislature painted with too broad a brush.

They ended up impacting other professions, including consultants and freelancers producing intellectual property and content, among others. For example, writers, editors, and photographers are limited to only 35 submissions annually, which has already triggered intense lobbying for exemptions.

And as California goes, so likely will other states. New Jersey, Colorado, Oregon, and Washington are already actively debating similar measures. More will probably join as well, potentially sewing together a convoluted patchwork quilt of 50 separate laws addressing the same workplace issues.

Whatever emerges, this is no small development. Millions could be affected. Already, more than a quarter of American adults — some 72 million people — participate in America’s $1.2 trillion gig economy, either online or offline. That number includes people also holding full-time jobs as well as those doing gig-only work.

In fact, more than one in 10 workers already rely on gig work for their primary income. Given current trends, those figures will only rise — along with political pressures, not to mention business pressures.

Compliance for companies operating in one state only will be tough enough. For companies with multi-state operations — or those using out-of-state freelancers — it won’t be one management headache, but possibly 50. Large companies with resources might fare better, but small and medium-sized firms will likely have a tougher time keeping up.

So how can CFOs and the companies they serve successfully navigate this new reality?

No matter what industry or profession you serve, it means finding and adopting greater agility in a constantly changing marketplace.

For example, the company I lead has long operated on an agile hybrid model. We embed experienced professionals — our company’s W-2 employees — in our clients’ businesses. Clients don’t need to pay our consultants’ benefits because we already do.

That same agility includes several instances when our clients wanted to hire specific individuals with specialized skills but preferred not to go the 1099 route. Our solution was simple. We hired those same individuals as our own W-2 employees; we afford them employment protections and benefits and then deploy them to work with those clients.

Technology is also helping boost gig agility with freelance management systems (FMS). These cloud-based platforms help companies manage freelance and gig workers with onboarding, assignments, invoicing, payments, as well as federal, state, and local tax forms. These platforms will need to be updated as new gig-economy laws are written, but at least it’s an agile step in the right direction to help business cope with change.

Some of these platforms, like UberWork, will now be built with an employment model at their core. A human cloud tool — if designed in compliance with the new regulatory environment in mind — can provide the sought-after business agility, transparency, and speed while also de-risking the business choice.

Now that California’s AB5 is law, it remains to be seen how other states react. But one thing is for certain: businesses using more agile approaches will be more competitive than those wishing the issue would just go away. It won’t.

Economic and generational drivers plus technological advances and disruptors will only make America’s economy an even more complex mix of full-time, part-time, and blended work.

And unless Congress starts passing one-size-fits-all laws, we’re all going to have to adjust to a new and evolving reality: a patchwork quilt of — hypothetically — 50 state laws governing America’s trillion-dollar-plus gig economy and the myriad business challenges that will come with them.

As management guru Peter Drucker once said: “The greatest danger in times of turbulence is not the turbulence — it is to act with yesterday’s logic.” I agree. And I’d add this: by applying today’s logic to the gig economy, agility just might be your new best friend.

Kate Duchene is the CEO of Resources Global Professionals, a publicly held global consulting firm enabling rapid business outcomes by bringing together the right people to create transformative change. She previously was an employment attorney for a global law firm.