New California ‘Gig’ Law Could Have Impact on Collection Agencies

A new law generating consternation in California that has the potential to spread to other states across the country could impact the credit and collection industry as well as the call center industry, depending on how individuals are classified by the companies for which they work.

Assembly Bill 5, known as the Uber Law, would codify which types of workers can be classified as independent contractors and which would have to be classified as employees and would force employers to prove their cases. Independent contractors, or freelanacers, do not have the same rights as employees, such as the right to a minimum wage. Hiring independent contractors instead of employees can save companies significant amounts of money, as much as 30% per individual, in some cases.

Companies that have jumped on the “gig economy” bandwagon, such as Uber, Lyft, and DoorDash are concerned about the impact that AB 5 could have on their businesses by turning what used to be freelance drivers into employees. But a lot of other industries are also facing an backlash from the rule, including 2.1 million people across the country working as “administrative and support services” employees, a category that includes call center and debt collection agencies.

About 400,000 Californians work for platforms like Uber, Lyft, and DoorDash, but the bill could also include 1.5 million freelancers working in the Golden State, too. A number of occupations, such as accountants, private investigators, and commercial fishermen are exempt from the law, but many types of workers are not.

The law would define an independent contractor as someone “who runs an independent business; who is hired by a company to do something outside of that company’s usual course of business; and who has full say over how, where and when they complete that job,” according to a published report.

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