Ripoff: Taxpayers Subsidize The “Gig Economy”

Did you ever wonder why “gig” companies are opposed to AB5, California’s new law that forces billion-dollar companies to treat its workers as employees rather than “independent contractors”?

Well, it’s about money, as usual.

Here’s what happened. Thirty years ago, the California Supreme Court issued the Borello decision that set out the tests to determine whether a worker was an independent contractor or employee. Then, in 2018, the California Supreme Court updated the tests in the Dynamex case. 

 The California legislature then passed Assembly Bill 5, which made the Dynamex tests the law. A business can apply for an exemption from AB5 if it can establish it meets specific criteria.

Assembly Bill 5 protects workers. Period. As employees, “independent contractors” in name only will now be entitled to minimum wage and overtime pay, paid sick days, injury protection, unemployment benefits, paid family leave, and discrimination and sexual assault protections.

So who can be against that? Easy answer. Companies who are benefiting from misclassifying employees as “independent contractors,” that’s who. The U.S Department of Labor found that up to 30% of audited employers misclassify workers as “independent contractors” when they are employees.

So as a taxpayer, why would you care? Because you are being forced to pay the employer’s tax burden. Here’s how. 

When an employer misclassifies a worker as an “independent contractor,” the employer doesn’t have to pay taxes into the Social Security, Medicare, and Unemployment Insurance systems. That means you are subsidizing the employers’ “business model.” The State of California estimates that the state revenue loss due to misclassifying employees is as high as 7 BILLION dollars each year. 

So next time you jump into a car service, remember this: the cost to you as a taxpayer is a lot more than what your credit card was charged.