California employers are familiar with AB-5 by now. The law aimed to protect workers from misclassification. Employers have had to use the ABC test to reevaluate whether workers they classified as independent contractors are indeed contractors under these terms.
However, new statistics indicate that the law may not be working as intended. What should employers know for the future?
What does the research say?
According to the U.S. Chamber of Commerce, many lawmakers believed that AB-5 would lead individuals classified as independent contractors to become employees. It seems that did not happen, however.
The implementation of the ABC test and the ensuing reclassification of employees led to a decrease in employment across California. Studies found that employment fell by about 4.4%.
It could be aggravating the labor shortage
Since the beginning of the COVID-19 pandemic, employers of all sizes have been struggling to fill positions. There are various factors behind the country’s labor shortage, including, but not limited to:
- The effect of inflation and cost of living crises affecting workers’ decisions
- A higher rate of workers retiring than those entering the workforce
- Reduced worker retention, for several reasons
The effects of AB-5 on employment could contribute to the challenges that many employers face in the job market today, making it even tougher to find talent.
What can employers facing these challenges do?
It is natural and understandable for employers and business owners to worry about their bottom lines and the futures of their businesses. However, it is critical to remember that workers play a large role in that success.
While employers must still comply with AB-5, there are ways they can manage the challenges they face. It may help to:
- Invest in their current workforce with new training or opportunities
- Reevaluate workplace benefits and incentives
- Foster a healthy work environment for workers and employers alike
In navigating the rules of AB-5, it may help to consult with an experienced employment law attorney. That way, employers can ensure they are in compliance with the law, while also preparing strategies to manage the effects of a labor shortage.
