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California passed the Assembly Bill 5 that entitles gig workers with employment rights. The bill codifies a new ABC test for classifying workers as employees. Under the test, workers performing a function central to a company's business should potentially be classified as employees and not independent contractors. The bill presents a challenge for ride-hailing companies operating in California where drivers are deployed as independent workers and are not entitled to any of the traditional employment rights, including minimum wage, paid time off and leave sick. Uber and Lyft have estimated that reclassifying their drivers as employees would increase their costs up to 30 percent.
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