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Why some staffing companies are leaving California

Dec 19, 2019

What you need to know: Some staffing companies are leaving California rather than offer workers what they deserve as a reaction to the new AB5 regulations. If you’re affected, check out Employbridge—you get the flexibility you love plus the benefits of being a W-2 employee.

The state of work in California is changing. Why? Because of AB5. This new California law aims to protect hourly workers by making employers offer the benefits and protections that workers deserve.

At Employbridge, we’re passionate about helping companies stay fully staffed and giving hourly workers the full protections of W-2 employees. While we focus on offering flexible work opportunities, we also believe the benefits of being a W-2 worker are fundamental.

If you’re curious about what’s going on with California hourly jobs—or how it may impact you—read on.

The Difference Between 1099 and W-2 Work

This whole thing starts with “worker classification.” That revolves around whether you’re a 1099 contractor, an independent individual who provides contract work for a company, or a W-2 employee, who receives a regular wage with benefits and protections.

Here are the basics:


  • No overtime
  • No workers' compensation or liability insurance
  • You find and pay for your own benefits
  • Payment depends on job
  • The worker has to pay taxes independently*


  • Overtime eligibility
  • Protections like workers' compensation and liability insurance
  • Access to health insurance
  • Guaranteed minimum hourly wage
  • Employer withholds taxes


*Not-so-fun fact: 1099 employees often end up paying 7% more in taxes to the federal government than a W-2 employee at the same wage.

What is AB5?

Coming into effect on January 1, 2020, California’s Assembly Bill 5 is changing the way companies have to classify temporary workers. For companies that use business models based on staffing out or using 1099 contractors, they now have to prove that their contractors are:

  1. Free from the control and direction of the hiring entity in performing the work.
  2. Working on work that is outside of the usual course of business.
  3. Typically working in the same independently established occupation as they’re working on for the hiring company.

These restrictions are much narrower than previous regulations and are having a massive impact on hourly workers. As January 1st approaches, staffing companies and others whose employees fit these criteria have been tasked with reclassifying their workers as W-2 employees.

The Impact on California Hourly Jobs

For companies that do business by classifying workers who fit these regulations as 1099 contractors, providing no worker protections, reclassification is a challenge. They are tasked with deciding between changing how they treat their employees - giving them the benefits they both need and deserve - and maintaining their current profit margins.

Some staffing companies have already chosen to cease doing business in California, leaving workers without jobs and employers without the personnel they need to do business. If you are one of those individuals, please know that Employbridge is here for you.

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