This archive report was first published on 12 September 2019.
Published on September 12, 2019, California's new contractor law has left many businesses scrambling to understand its implications. The law aims to address the issue of companies classifying workers as independent contractors to avoid paying payroll taxes and lowball bids on projects.
For app-based businesses like Uber, which held a troubled initial public offering in May 2019, the costs of complying with the new law could be significant. Uber has reported large losses and slowing revenue growth, and has laid off hundreds of employees in recent months to cut costs.
However, some traditional businesses argue that the mandate merely levels the playing field. Construction companies, for instance, have long complained about unfair competition from rivals that classify workers as contractors.
"App-based companies are starting to send carpenters, electricians, plumbers off their platform — independent contractors who make very low wages," said Robbie Hunter, the head of the state building trades council that represents construction worker unions in California. "They're undercutting brick-and-mortar businesses doing the right thing — paying for workers' compensation, being very efficient, working hard to make a profit."
But the new law has also created anxiety and confusion among small businesses. Small vineyard owners, for example, are concerned that they could be forced to directly employ the independent truckers they use to haul their harvests and become responsible for providing insurance and workers' compensation.
"Our members are growers, not trucking companies," said Michael Miiller, director of government relations at the California Association of Winegrape Growers. "The target of legislators is Uber and Lyft, but the unintended victims are small, independent vineyards on the coast of California."
One such business owner is Saunda Kitchen, who owns a Mr. Rooter plumbing business in Sonoma County with 30 employees. She pays payroll taxes and provides the various mandated benefits, but fears that she herself would have to become an employee of Mr. Rooter under the new law, which could cause the parent company to pull out of the state.
