This week, the California legislature passed Assembly Bill 5, which defines so-called gig economy workers as employees instead of independent contractors. Though aimed at transportation-network companies (TNCs) Uber and Lyft, the bill, taking effect in 2020, could have wide-ranging effects on California’s economy—and the nation’s. By forcing new-economy companies to adopt rules developed for twentieth-century employees, California is missing an opportunity to create a new class of worker, a hybrid of independent consultants and traditional employees. AB5 is intended to ensure that TNC drivers receive minimum-wage and overtime protections and that companies pay workers’ compensation and other payroll taxes. Unlike...