California’s landmark gig-work law, AB5, takes effect Wednesday amid a swirl of controversy, confusion and escalating challenges.

Gig companies, truck drivers and freelance journalists are suing over it. Hours before its implementation, truck drivers won a temporary restraining order blocking California from enforcing AB5 against them. Uber, Lyft, DoorDash, Postmates and Instacart are mounting a $110 million ballot campaign seeking to exempt their workers. Some out-of-state companies are dropping California freelancers while others are requiring them to incorporate. Some companies are reclassifying workers as employees; others are not. The law’s author plans to introduce additional legislation soon to clarify more aspects.

Despite the hoopla, AB5 will not cause legions of independent contractors to magically be transformed into employees. That requires companies to take proactive steps — or be forced to act by government agencies or courts.

The law’s intent is simple. It codifies, clarifies and extends a 2018 California Supreme Court decision called Dynamex that makes it harder for companies to claim workers are independent contractors. It says workers should be employees unless a) they are free from a company’s control, b) do work outside the company’s core business, and c) have independent enterprises performing the same type of work.

A range of professions, including doctors, lawyers, architects, engineers, accountants and more, are exempt from the new law’s strict test and instead covered by a previous test known as Borello.

AB5’s author, Assemblywoman Lorena Gonzalez, D-San Diego, and other vocal supporters, such as organized labor, say workers need the protections and benefits of being employees to prevent them from being exploited.

Its equally vocal foes say it’s an end run that jeopardizes the flexibility that companies and workers rely on. It’s “irrational and unconstitutional,” Uber and Postmates wrote in a federal lawsuit filed Monday that seeks to block AB5 from applying to them. Not coincidentally, turning contractors into employees can add about 30% to companies’ labor costs.

A look at some of the issues:

What are companies doing? Uncertain about the bill’s implications, organizations are taking a variety of approaches, said Mike Boro, partner for workforce of the future at giant consulting firm PwC.

“I have a couple of clients who are actually affirmatively not complying with the law,” he said. “Part of what they’re counting on is that the individuals (currently working as contractors) prefer not to become employees so won’t raise the issue and the state will have too much to do to look at them.” A PR representative later emailed to clarify that Boro did not mean companies plan to defy the law.

Other strategies his corporate clients are using include contracting with third-party agencies that hire gig workers, turning their gig workers into employees, or not hiring freelancers from California, he said.

“I can’t think of a single industry that doesn’t have parts of it impacted,” he said. “Lots of traditional employers have decided that a particular part of what they do is better served by nonemployees. It allows them to flex the size of the workforce on an as-needed basis.”

Emily Baker, a Los Angeles lawyer who advises small online businesses, said the law means her clients face either closing shop, running their entire business by themselves or moving out of state. Many are pausing operations while figuring out what to do.

“I’ve had more crying on the phone about AB5 — the confusion, frustration and increase in overhead,” she said. AB5’s numerous exceptions and some inconsistencies in the language increase uncertainty, “making it hard for businesses to figure out what to do,” she said.

What are workers doing? Since AB5 does not automatically reclassify contractors, those who meet its criteria would have to act to seek a change in their status, by filing lawsuits or complaints with government agencies.

Some Uber drivers have already sued to be reclassified as employees under AB5 and Dynamex. Similar lawsuits by workers at Uber, Lyft, DoorDash and other gig companies are already in courts under the previous Borello criteria.

Conversely, contractors who wish to remain independent may not have much say in the matter — that’s what prompted the lawsuits by truck drivers, freelance writers and photographers. A driver for Uber and one for Postmates each joined in those companies’ lawsuit, seeking to remain contractors.

The new law exempts businesses providing services to other businesses under certain conditions. Some contractors have decided to incorporate or register as limited liability companies in a bid to stay independent.

That’s what Alessandra Bonatti did. A conference interpreter who speaks four languages, she set up a corporation “because I understand that companies that hire me here in California would require me to be incorporated or run the risk of finding themselves in trouble,” she said.

Incorporating was complicated and expensive, requiring the services of a lawyer and accountant, and will continue to cost more in the future, she said. “But it gives me ease of mind for sure,” she said. “Indeed, there have been agencies (organizing events and conferences) that have asked.”

While it’s still early to draw firm conclusions, data from the California secretary of state show an increase in new registrations for corporations and limited liability companies since September, when AB5 was passed, compared with the same time frame in 2017 and 2018.

How will AB5 be enforced? The law empowers city attorneys to go after companies for noncompliance, something that Gonzalez tweeted she hopes will happen as soon as possible. The Uber-Postmates lawsuit specifically raises this possibility and seeks a preliminary injunction to forestall it.

“It was important to provide city attorneys with the ability to sue because that might be the only way to get group relief without being blocked by the federal arbitration act,” said William Gould, an emeritus law professor at Stanford, referring to the fact that gig companies require workers to agree to mandatory arbitration, blocking their ability to file class-action lawsuits.

The city attorneys of San Francisco and Los Angeles in September both expressed willingness to take action to enforce AB5.

Other government entities can act as well. The Employment Development Department and the Department of Industrial Relations have already mailed a letter to more than 1 million California employers and set up a website explaining the law, said EDD spokesman Aubrey Henry in an email.

Its goal “is to ensure both workers and employers have the information and resources they need to ensure compliance,” Henry wrote. “Businesses suspected of non-compliance may be selected for payroll tax audits or inspections.” Companies could cross its radar for independent contractor tax forms, worker claims for unemployment or disability benefits, on-site inspections and referrals from other government agencies.

What about the ballot initiative? Signature gathering should start this month for a proposed measure that would leave app-based drivers and couriers as independent contractors while guaranteeing them a wage floor and some benefits. It needs about 630,000 signatures to qualify for the November ballot.

Uber, Lyft and DoorDash have each pledged $30 million for the initiative; Instacart and Postmates are each putting in $10 million. That $110 million war chest plus opposition spending could make it among California’s costliest ballot fights.

“We’re gearing up for a major campaign” against the measure, said Steve Smith, a spokesman for the California Labor Federation, which views AB5 as a significant worker victory — and hopes to organize Uber and Lyft drivers and other gig workers once they are employees. “Given the heavy spending on the other side, we’re going to be prepared to move forward on educating voters earlier in the cycle than normal.”

With a presidential election, November turnout is likely to be heavy in the Democratic bastion of California. Virtually every leading Democratic presidential candidate has endorsed AB5 and backed similar legislation at the federal level.

“All the people who come out to vote against Trump — that doesn’t bode very well for the ballot initiative,” said Beth Ross, a San Francisco labor lawyer.

Carolyn Said is a San Francisco Chronicle staff writer. Email: csaid@sfchronicle.com Twitter: @csaid