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New and proposed state-level labor laws have been lauded and reviled for their gig economy impacts. But what does the fallout imply for C-suite career outlooks?
You’re not just satisfied with making an impression on your chosen domain — you’d prefer to affect genuine, long-standing change. Aiming for a seat on an advisory board is one way to shape the economic forces that guide society. It’s far from a traditional path, however, and in light of rapidly evolving worker classification standards, it may come with unanticipated concerns.
Serving as an advisor or director isn’t quite analogous to being a member of the gig economy, yet the similarities prove surprisingly worthy of consideration. Here’s how things might shape up following the enactment of labor laws that seem poised to transform a significant portion of today’s economy.
The AB-5 Scuffle in Simple Terms
California’s Assembly Bill 5, signed into effect in September 2019, was initially scheduled for a January 1, 2020 implementation. The crux of the law lay in its codification of a court ruling that established a rigorous three-part rubric for determining who counted as a company employee and who could continue acting as an independent contractor, or IC, under existing frameworks. Before the implementation of this so-called ABC test, such designations depended on a more permissive multifactor assessment, the Borello test.
Why All the Fuss?
As with most new laws, AB-5 generated varied responses. Some companies that employed California residents under ongoing contracts abruptly dropped their ICs. Lyft and Uber, the two companies whose labor practices prompted the bill’s creation, announced their intention to fight against the rule. Across the aisle, many advocates welcomed the expansion of workforce protections, such as minimum wages, arbitration mechanisms, and insurance benefits.
A Taste of Things to Come
While the private sector and the general public are still hashing out various arguments, other states have indicated they might be drifting in California’s direction. In New York, for example, legislators scheduled sessions to address a copycat bill, S6699A, in early 2020. New Jersey lawmakers also reviewed comparable legislation, the S4204. Although this proposal seems to have stalled for the moment, it’s worth noting that union leaders, governors, and presidential candidates alike have declared their support for similar rules.
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What Does All of This Have to Do With Executives?
At face value, these kinds of laws might not appear to impact upper-level professionals. If you currently hold a C-suite position, you’re probably not picking up armies of rideshare users on the side. On the other hand, this kind of thinking could prove hazardous, depending on your situation.
Imagine that you were building your enterprise with a particular exit strategy in mind. A new classification test might force you to rethink the realities of your company’s valuation. If you relied on gig workers to maintain an attractive bottom line, then it would be worth reassessing the inherent costs and benefits of your employment practices.
Board Members and the ABC Standard
Bills like AB-5 also include several explicit dispensations. One of these carve-outs stipulates that board directors remain subject to the same exclusions previously established by the California Unemployment Insurance Code. According to this law, corporate directors are not employees. In other words, they — and the companies they work with — don’t need to overhaul their professional relationships.
Potential problems might arise, however, if you choose to serve on an advisory board. The ABC test at the heart of these laws demands that businesses prove three separate facts to earn exemptions regarding employment taxes and other worker concessions:
- Workers have to be free from their company’s control.
- Workers must provide services that aren’t in the company’s main line of business.
- Workers must furnish the same services to external companies on a regular basis.
An advisory board member might not satisfy all these criteria, and a lot of work goes into making case-by-case determinations. For instance, the type of strategic advice you offer is likely to overlap with a company’s trade, but that doesn’t mean they’re the same. Chances are also good that you might provide your services to one enterprise under exclusive terms.
Even if you ostensibly meet the ABC criteria, it’s hard to tell how things will play out. Thanks to the jumble of confidentiality, ethics, directorship, and other agreements that board members subject themselves to, there’s not much of a basis for predicting what’s in the pipeline. These laws’ consequences may remain hazy until ongoing disputes play out in the court systems or legislatures.
Is It Time to Recalibrate Your C-suite Career Outlook?
This doesn’t mean you should head for the hills or move to a different state if yours passes a stricter classification framework. At this early stage, the laws are likely to see further modifications.
With that said, the value of looking ahead can’t be understated. For instance, some might find it prudent to follow circuitous tracks to their ultimate destinations, such as seeking a director position on the road to VP status. Others, such as those who fulfill nonpaid board roles, may want to watch how their companies respond to new legal obligations — before investing in a leap to a paid position.
Finally, take a cue from the now-scrambling gig workers who failed to diversify adequately. Things are still in motion — as you should be. Instead of putting all your eggs in one basket, keep that resume polished, and never lose sight of the next step in your career.
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