In the early 1900s, the word “gig” appeared in jazz clubs, referring to a live music performance.

“It was designed for short-term expertise,” said Mike Boro, a partner with PricewaterhouseCoopers. “Now, it’s no longer that way.”

A plethora of professions now refer to their work as gigs. A software developer might choose to pursue projects on the side. Apps such as Uber, Rover and Fiverr are recruiting armies of drivers, dog-walkers and freelancers.

Many of these workers will need to go full-time with their gigs under Assembly Bill 5, a bill proposed by Assemblywoman Llorena Gonzalez of San Diego and signed into law on Sept. 18 by California Governor Gavin Newsom.

Not Prepared for Law

Assembly Bill 5 dramatically redefines what types of jobs may be counted as contract work. Most San Diego startups are unprepared for the changes, local law firms said.

“I think it’s difficult for many startups to wrap their head around the legislation,” said Tara Pelan, co-founder of Carlsbad-based Coeptus Law Inc. “Startups, I think, are particularly affected because they’re lacking substantial access to money and flexibility. …When you’re hiring independent contractors versus employees, you gain a cost saving and you have flexibility. This would eliminate those two aspects.”

The new law essentially codifies a recent California Supreme Court decision, Dynamex Operations v. Superior Court, which says workers must meet three qualifications to be an independent contractor:

  1. They must be free of their employer’s control.
  2. They must do work “outside of the usual course” of the company’s business.
  3. They must be in a trade occupation or business similar to the work being

performed.

Otherwise, they must be reclassified as employees, with benefits.

San Francisco-based grocery delivery startup Instacart has already been hit by a lawsuit from San Diego City Attorney Mara Elliott, saying workers should be paid retroactively for minimum wage, overtime pay and expenses after being misclassified.

Uber Makes Its Own Case

Other startups, such as Uber, are digging in their heels. Uber’s attorneys have argued that the company’s drivers are not core to its business; rather, the company is a “technology platform for several types of digital marketplaces,” Uber’s Chief Legal Officer Tony West stated in prepared remarks.

Local startups, such as Seismic Software and Mercato also did not anticipate changes to their workforce. Seismic stated it seldom uses independent contractors, and when it does, the company works with a third party. Though Mercato’s platform offers deliveries from independent grocers, the company doesn’t work with drivers directly. CEO Bobby Brannigan said they work with other companies, such as Doordash or Postmates, to fulfill deliveries.

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