The recently passed Assembly Bill 5 in California will change the state’s classification of an employee, thus extending employment status and its benefits to more than 1 million people.
Employers typically save money by keeping individuals as contractors rather than as employers. One reason being that most employees rely on employers for healthcare and contractors have to foot that bill entirely on their own. Additionally, contractors usually have to pay the entirety of payroll taxes on their own, while employees have part of their payroll taxes paid by their employers.
The change in classification could help close the gap on an estimated $7 billion a year in unpaid income taxes. The law itself has been dubbed the “Uber Law” since it will now classify Uber drivers as employees but it also extends to other industries. Such industries include those who work in the health care industry and truck drivers.
The law itself might also lower the quality of services that are delivered. For example, Uber might take on less drivers since it will be forced to pay higher wages and benefits to its drivers. Other cities, such as New York and Seattle, are looking into implementing similar laws.