Online marketplaces and platform businesses face unique challenges under AB5. The key question: Are the workers using your platform YOUR employees, or independent businesses serving customers through your platform?
The Platform Defense
Many platforms argue they're merely connecting buyers and sellers, not employing anyone. This "platform" or "marketplace" defense has had mixed success:
When the Defense Fails
- Platform sets prices workers can charge
- Platform controls how work is performed
- Workers cannot build their own customer base
- Platform handles payments between parties
- Platform provides tools/equipment
- Platform brand is primary (not worker's brand)
When the Defense May Succeed
- Workers set their own prices
- Workers have their own branding/identity
- Workers can serve customers off-platform
- Platform is truly just a lead-generation tool
- Workers have independent businesses outside the platform
Platform Types Analyzed
Service Marketplaces (TaskRabbit, Thumbtack, Handy)
Risk Level: HIGH
These platforms often fail Prong B because the services ARE the platform's business. When a customer hires "TaskRabbit" to assemble furniture, the Tasker is doing TaskRabbit's core business.
E-commerce Marketplaces (Etsy, eBay)
Risk Level: LOW
Sellers on Etsy run their own businesses, set their own prices, develop their own products. The platform is a true marketplace.
Professional Services (Upwork, Fiverr)
Risk Level: MODERATE
Freelancers often have independent businesses with multiple clients. However, if the platform controls pricing, handles all communication, and treats freelancers as interchangeable, risk increases.
Care Platforms (Care.com, Rover)
Risk Level: MODERATE-HIGH
The nature of care services often requires platform oversight for safety. This control may push toward employment relationship.
The Referral Agency Exemption
Some platforms may qualify for the "referral agency" exemption under Labor Code 2750.3(j). Requirements include:
- Agency's business is making referrals to clients
- Agency doesn't control how services are performed
- Agency doesn't control service provider's working conditions
- Client controls manner and means of service
- Service provider sets their own rates
- Service provider can work for other agencies
- Service provider maintains their own clientele
Compliance Strategies
| Strategy | Description | Trade-offs |
|---|---|---|
| True Marketplace Model | Let workers set prices, build brands, serve customers directly | Less control, harder to ensure quality |
| B2B Only | Only work with incorporated businesses, not individuals | Limits worker pool, more administrative |
| Employee Model | Classify workers as employees, gain full control | Higher costs, benefits, tax obligations |
| Hybrid | Employees for core services, contractors for ancillary | Complex, requires careful line-drawing |