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New California labor law AB 5 is already changing how businesses treat workers

Margot Roosevelt, Los Angeles Times on

Published in Business News

LOS ANGELES -- At Yogala Studios, a small, cozy storefront in Echo Park, the teachers work mostly part time, some giving just one class a week. Workshops are offered in "the ancient spiritual, philosophical and meditative traditions of yoga and tantra," as well as in "meditation to tap into our creative potential to move through negative blocks."

Recently, though, the studio has had to confront a very modern challenge: It is reclassifying its instructors, who had always been independent contractors, as employees with extensive labor protections because of California's sweeping new law, Assembly Bill 5.

They aren't complaining. "These are yogis," said owner Samantha Garrison. "They look on the bright side of things."

Across California, AB 5 is upending workplaces, prompting lawsuits, furious social media campaigns and a multimillion-dollar ballot initiative, sponsored by Uber, Lyft, Postmates and DoorDash, which are refusing to grant employee status to their tens of thousands of drivers.

But as critics demand exemptions and even a repeal of the statute, many California businesses, large and small, are quietly adopting strategies to comply with the law, which took effect last month. It hasn't been easy.

AB 5 sets a new standard for hiring independent contractors, requiring many to be reclassified as employees covered by minimum wage, overtime, workers' compensation, unemployment and disability insurance.

 

With companies also having to cover employees' Social Security and Medicare taxes, costs can mount. "I knew I needed to bring in more money," said Garrison, who raised her prices from $22 to $26 per class.

So far, her clients aren't upset, she said. "I reached out to every member. But it's been a huge headache -- a lot of paperwork and technicalities."

The new law grew from a 2018 California Supreme Court decision in a case brought by drivers for Dynamex Operations West, a package delivery company. The court found the company illegally switched its workers' status from employees to independent contractors to boost profits.

Workers have brought similar misclassification cases across the U.S. for decades as companies offloaded once-stable jobs to independent contractors and temporary help agencies in what some experts call "a fissured workplace." But the nation's growing income inequality is spurring a push for stricter laws.

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