Don’t Kill the Growing Gig Economy

What was the biggest local business story of the year? With a sigh, I vote for the state Supreme Court’s decision in April that basically outlawed the gig economy in California. I sigh because the ruling truly may disrupt the way business increasingly is being done today, especially here in the Valley area. In its decision in a case titled Dynamex Operations West v. Superior Court, the court essentially said you should not hire an independent contractor to do work that is a core part of your business. Instead, you need to hire that person as an employee. If you are a baker and you have a contractor on call who comes in as needed to make specially decorated cakes, you may need to hire that person, if only part time. Let’s be honest. California businesses increasingly have shifted work to independent contractors as a way to control employee costs and reduce the legal hazards of having people on the payroll. Presumably, the ruling was an impulse to counter that trend by forcing businesses to hire employees instead of paying contractors. The ruling will make operating a business more expensive. But the ruling will stifle many workers, too. The court seemed to ignore the fact that lots of workers have embraced the gig economy as a way to take command of their careers in a manner only dreamed about a few years ago. I recently met a young man at a social gathering who proudly described himself as a tennis pro. But he said he only did it freelance; he was not employed by a club or school or anything. Wondering how he could survive financially, I asked something like: “Are you able to get a stream of clients to keep it sustainable?” He shook his head. “Not yet.” He whipped out his phone and opened his Uber app. “This is how I do it.” He showed me that he makes $300 to $400 a week as a driver. The best thing, he said, is that he picks his hours; he drives only when he needs to fill a vacant spot in his day, or to fill his entire day, if need be. It’s not a great deal of money, but he earns just enough to allow him to pursue his dream career. His goal, he said, was to be a full-time, self-sustaining tennis pro in a year. This is the kind of opportunity allowed by the gig economy. If that young man had been born 10 years earlier, he may have only been able to dream of being a tennis pro someday. If Uber is forced to hire him as a result of the Dynamex ruling, will he have to work set shifts, ruining the flexibility that allows him to pursue his dream career? For that matter, would Uber even continue to exist in California? The gig economy is empowering older workers and higher-paid professionals, too. You may know of accountants, lawyers, PR people and the like who are able to quit their jobs to get off the merry-go-round and focus on a few accounts from home or from a coworking space. The gig economy makes it easier for folks to go into semi-retirement. Gig work is more prevalent in California and surely in Los Angeles and in the Valley area, where a great number of people work part-time or as contractors to earn some cash between projects in the entertainment industry or in the broader creative ecosystem. The gig economy is made for Los Angeles. The Dynamex ruling will hurt here more than most places. Surely not all gig workers like the arrangement. Some may have to take contractor status out of desperation, and they’d prefer to be a full-time employee with benefits. But how many is that? One poll last August said only 7 percent of independent contractors would prefer to be an employee. That survey was sponsored, so the results may be dismissed. But even if the true number were two or three or even four times that amount, it still means a healthy majority like the freedom and flexibility of independent employment. In any case, gig work clearly is growing. One recent study projected that such workers could balloon to 40 percent of the workforce by 2020. Of course, the Dynamex ruling was shocking to companies that totally rely on gig workers. That’s why such firms as Uber, Lyft and Doordash wrote to Gov. Jerry Brown last summer saying that transforming their drivers into employees would imperil their ability to stay in business here and that Dynamex, if allowed to stand, would destroy independent contractor jobs in the state. So far, there appears to be little legislative or administrative impetus to neutralize the ruling. Businesses hate Dynamex, but the business lobby has little to no sway in Sacramento and may have negative sway. Labor unions like the Dynamex ruling. (Employees can be unionized, after all.) Since unions are very powerful in the state, the legislature may balk at doing anything meaningful to roll it back. So, businesses hate it but labor loves it. That may leave the issue up to the average Californian to decide. If enough everyday people stand up for the gig economy, Dynamex could be overturned, maybe through the initiative process. Perhaps the ultimate arbiter in this matter will be the state’s workforce. Many of whom were set free by the gig economy. Charles Crumpley is editor and publisher of the Business Journal. He can be reached at [email protected].