California’s Assembly Bill 5 (AB 5) passed in the State Senate last week, and is expected to be signed into law. AB5 is intended to ensure that “gig” workers like Uber and Lyft drivers receive minimum wage, overtime protections, and that companies pay workers’ compensation and other payroll taxes. The new law requires that contractors are not under control of their hiring entity. They can not receive direction, which rules out workers in home health and hospice.
In California, home health agencies are already required to hire their caregivers as employees, but other workers like therapists can be hired on a contract basis. The cost of recruiting and retaining qualified therapists and similar workers as employees can be dramatically higher than contracting. Even if agencies would like to hire full-time staff, the crippling labor shortage faced by the health care industry as a whole makes that difficult for most.
Big states like California and New York tend to lead the way on labor regulation. It will be important to watch how this new law impacts health care workers across California. Similar legislation could be coming to your state in the near future. In states that have more relaxed laws around contract labor, there could be an even bigger disruption.