These last few months have been encouraging for fans of independent contracting. In several cases, proponents have won important victories against those who would impose burdensome new requirements on employers that force them to reclassify workers as employees. States like Alabama and Georgia have passed laws clarifying that app-based transportation and delivery drivers are not the same as traditional employees so long as workers are free to shop employers and have control over their work schedules. Meanwhile, in Pennsylvania, a federal court dismissed a nine-year-old case alleging that Uber drivers were misclassified as independent contractors.
However, perhaps nowhere has there been a more important victory for independent contracting than in California. In late July, independent contractors won an important victory when the California Supreme Court issued a decision upholding the constitutionality of Proposition 22—a 2020 ballot measure that successfully exempted ride-sharing companies from the Golden State ban on contract work.
The unanimous ruling closed the chapter on one of the most closely watched legal battles in the country over worker classification. The ruling has important implications for other states that continue to debate the merits of their own worker classification laws and frequently look to California’s example. Policymakers would be wise to take note of this ruling and pass laws that give workers maximum freedom to decide what type of employment works best for them.
The debate over worker classification essentially boils down to whether those who work for companies on a contractual basis should be treated as traditional employees by law. Traditional employment has some advantages, of course, but there is a reason independent contracting has become so popular: work flexibility and a desire by Americans to work on their own terms to name just two.
A recent study by MBO Partners found that 77 percent of full-time independent workers report being “very satisfied” with independent work, and 78 percent express no plans to change the arrangement. As it turns out, workers value the freedom to be their own boss, and the ability to set atypical work hours that allow them to be with family. Workers know their desires better than politicians—and policymakers should not attempt to strip away their freedom to decide what works best for them.
Eliminating independent contracting is not only bad for workers, but also for consumers. Everything from ridesharing services and food delivery to hospitality and travel relies on a workforce that is overwhelmingly comprised of independent contractors. At a minimum, reclassifying those workers as traditional employees could drive up the price of labor and lead to negative downstream consequences for consumers like higher prices and fewer product and service options.
California experimented with reclassification in 2018 when the state’s high court established what is known as the ABC Test. Originally designed to make it easier to determine a worker’s employment status, the test instead made it far more difficult for companies to hire workers as independent contractors—the primary business model of the gig economy and a growing number of freelancers. State lawmakers later codified this test into law with the passage of Assembly Bill 5 (AB-5).
The law caused significant industry disruption, sparking news headlines of freelance journalists and photographers receiving layoff notices—but newsrooms were not the only ones affected. Research from the Mercatus Center found that not only did the law not lead to growth in traditional employment, but it also unintendedly reduced overall employment in affected occupations by 4.4 percent, with self-employment declining by 10.5 percent.
Fortunately, California voters overwhelmingly approved Proposition 22 in November 2020 to exempt transportation and delivery drivers from the unintended consequences of AB-5—setting the stage for a legal battle that ended favorably with the California Supreme Court’s recent ruling on the constitutionality of Proposition 22.
That is fantastic news for California’s nearly 1.4 million transportation and delivery drivers, who can now continue enjoying the independence and flexibility afforded them by app-based work. It is also good news for the millions more gig economy workers operating across the rest of the country who can now look forward to the potential introduction and passage of similar ballot measures in their states.
Independent contracting is an attractive option for a growing share of Americans who value career ownership and workplace flexibility. Independent contracting offers workers a viable alternative to the rigid nine-to-five work schedule common with most traditional forms of employment. Policymakers should encourage, not restrict, new and innovative work arrangements that empower Americans to live and work on their own terms.
Nate Scherer is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal
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