Is Your Side-Hustle Being Threatened?

Categories : Financial, News
August 26, 2020

Do you receive one or more 1099-MISC forms instead of W-2s for the work you perform? 35% of Americans receive at least one 1099-MISC. Many receive both a W-2 and a 1099-MISC, having both a primary job and what has become known as a side hustle. Other names for 1099-MISC work include gig work, freelancing, consulting, temporary work, contracting, and good old-fashioned self-employment. If you don’t receive a 1099-MISC, you likely know people who do.

State governments, with a wink and a nod from the Feds, are attempting to curtail your side hustle. The 1099-MISC sub-economy is being threatened on a daily basis by greedy governments looking to find yet another revenue source. Worse, perhaps, is their false claim that, “It’s all about you.” Be wary of those words from politicians, as unintended consequences generally follow. In this case, they want 1099-MISC workers to be switched (they say “corrected”) to W-2 employee status, and they contend that it is all about the worker.

In 2019, the California legislature passed Assembly Bill 5 (AB5), affectionately known as the “gig-worker bill.” It is mislabeled, as it should be called the “anti-gig-worker bill.” California AB5 took effect in January 1, 2020, and has been extensively challenged by such companies as Uber and Lyft.

Unfortunately, on August 10, 2020, an unelected California judge ruled against Uber and Lyft, demanding that their drivers be reclassified as W-2 employees, effective Friday, August 21.

Unintended consequences were immediately realized in California, where Uber and Lyft threatened to suspend operations at midnight Thursday. Among those negatively impacted would be many 1099 freelancers, along with customers, employers, and various enterprises opposing AB5. The inconvenience and cost to so many Californians created substantial push-back.

Resistance organizers in California have managed to get Proposition 22 on a ballot. Prop 22 would exempt app-based, on-demand, ride and delivery services from AB5. If Prop 22 doesn’t pass, look for Lyft, Uber, DoorDash, and others to leave California. Meanwhile, another judge granted a stay before the implementation date, so that Prop 22 will hopefully negate the impact of AB5.

Washington, D.C. has unsurprisingly entered the fray with the so-called PRO Act, which would bring AB5 to the national level. PRO has already passed the House, and its future depends on election results in November. Americans need to understand the social costs of this concept, and prevent its passage. Otherwise, you will have to take your own car or public transportation.

Arguing for W-2 employee status, rather than 1099-MISC freelancer, is specious and detrimental to the gig model that contributes an annual $1 Trillion to the national economy. Will Californians and unelected judges allow the demise of a thriving industry that helps millions of Americans? Stay tuned.

Van Wie Financial is fee-only. For a reason.