California AB5 Law and the Impact on the Relocation Industry
The new California AB5 Law may impact the relocation industry in several ways. The law aims to change how employees are classified. This is seen as a way to address the rise of the gig (or “sharing”) working economy and its perceived negative effects.
What is the California AB5 Law?
The California AB5 Law took effect on January 1, 2020. This law makes all independent contractors in the state into statutory employees. The law covers all types of workers, including truckers, drivers, and writers. Ultimately, the law requires the following:
- Extends employee classification status to gig workers.
- Companies must use a three-pronged “ABC test” to prove workers are independent contractors, not employees.
- AB5 is designed to regulate companies that hire gig workers in large numbers, such as Uber, Lyft, and DoorDash.
Consequences of California AB5 Law
Consequences of the law include companies like Vox Media announcing it will not renew the contracts of freelance writers for SB Nation, a sports-focused website. Some analysts believe the new law may impair the ability of workers to hold jobs. Some gig economy companies are pursing legal action to reduce the impact of the law on their operations. Other companies are departing the state due to the impact of the law; however, this may leave more opportunities for their competitors.
Assemblywowan Lorena Gonzalez, (D-San Diego), the architect of AB5, indicated that perhaps some freelancers have lost income, but she has stated “These were never good jobs…No one has ever suggested that, even freelancers.”
Employee Benefits Gained With California AB5 Law
Moving from the status of independent contractor to employee now lets these workers become eligible for a full range of benefits. In California, benefits employees become eligible for include:
- California Paid Sick Leave
- Unemployment Benefits
- Pregnancy Disability Leave
- Social Security Benefits
- Overtime Pay
- Worker’s Compensation Coverage
- Minimum Wages
- Family and Medical Leave Act Benefits (FMLA)
- Holidays and Vacations
- Final Wage Payment
How Might California AB5 Law Impact the Relocation Industry?
Household Goods Moving Companies
The new California AB5 Law might impact several aspects of the relocation process. One reason is due to some employers such as Household Goods (HHG) moving companies. These companies often utilize independent contractors and freelancers for their workforce as an accepted long-term industry practice.
Recently, a federal judge blocked California AB5 Law from applying to over 70,000 independent truckers. Without the block, this law might severely restrict the ability of HHG movers from operating in the state. The injunction was sought by the California Trucking Association on the grounds that the state ran afoul of federal law that governs interstate commerce. However, some HHG moving companies may still have concerns and confusion about the effects of the law and how best, or whether, they should comply.
Shared Ride Providers
Another reason is due to transferee acceptance of and preference for services provided by companies that epitomize the sharing economy. Examples of these companies are shared ride services such as Uber and Lyft. Transferees might contact a shared ride service company for a ride from the airport to a location during pre-assignment travel.
Companies such as Uber and others have filed a lawsuit against the state, asserting the new law is unconstitutional. Ultimately the suit notes that the law prevents independent contractors from benefiting from the flexibility offered by gig working arrangements.
What Should Employers do About the California AB5 Law?
Employers should review their relocation plans and timelines for any moves into and out of California. They should anticipate possible delays related to any household goods moving processes such as transportation, loading/unloading, and packing/unpacking services. They should also inform transferees about the new law, and how it might impact travel arrangements such as shared ride services.
Global Mobility Solutions’ team of domestic relocation experts have helped thousands of our clients with household goods moves and transferees into and out of the state of California. We can help your company understand how to plan for the impact of the California AB5 Law as it relates to your relocation program.
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Learn how to respond to the impact of the California AB5 Law from Global Mobility Solutions, the relocation industry and technology experts who are dedicated to keeping you informed and connected. Contact our experts online or give us a call at 800.617.1904 or 480.922.0700 today.