Democrats Ignore California Workers & Gig Economy, Put 2 Million Jobs in Jeopardy
Thanks to Democrats in the California Legislature, Assembly Bill 5 may result in the loss of flexibility, opportunities and income for up to two million California independent contractors. These independent contractors will now be forced to be employees and work specified shifts, focus on specified activities only, drive only for a single platform (e.g. Lyft, Uber, Doordash) and in a specific neighborhood.
Thousands of Jobs & Industries Impacted
Impacted industries include, among others: ridesharing, food delivery, design services, timber operations, single truck owner-operators, hospitality franchises (Pizza Hut, Marriott, KFC, IHOP, etc.), interpreting and translating services; physical, respiratory, massage, speech, occupational and other therapy industries; nonprofits, home repairs, catering and event planning, lab technology, nurse anesthetizing, optometry, social work, behavioral health, pet grooming, dog walking, pool cleaning, and many, many more.
Protecting Worker Independence
AB 5 should have protected all workers’ independence, flexibility and power to earn. Instead, Democrats made sure AB 5 did not.
More Than A Dozen Amendments Offered - Democrats Rejected Them
Senate Republican offered more than a dozen amendments to fix the flawed legislation. Senate Republicans offered to set the test for determining employment status consistent with the much more reasonable, flexible and workable “economic realities” test established by the federal Fair Labor Standards Act (FLSA).
The FLSA Independent Contractor Test - https://webapps.dol.gov/elaws/whd/flsa/docs/contractors.asp
- How integral the work is to the business
- The permanency of the worker’s relationship with the company
- The worker’s and employer’s investments in things like equipment
- How much control the worker has
- The worker’s opportunity for profit and loss
- How much skill is required to do the job and the worker’s initiative
Californians Want Independence and Flexibility
You should have the freedom to drive, work and take on projects whenever and however you choose. Now, single parents, students, anyone who chooses to be an independent contractor – all will lose the freedom of choice that allows them to work when and for whoever they choose.
Dynamex Background (doc)
Did You Get A Carve out? Did You Have A Lobbyist?
Instead of crafting legislation that would help all working Californians, Democrats chose to push through a flawed bill so they could issue labor union sanctioned “carve outs” to wealthier, more organized, Democrat-friendly industries, including some of the most connected groups in the state: lawyers, doctors, licensed insurance brokers, Wall Street brokers, investment advisors, and certified accountants.
Bottom line, if you didn’t have a paid lobbyist who filled out the labor union application for you, California Democrats probably didn’t give you a carve out.
Exemptions Go Through Union Lobbyists
Labor lobbyists presented a one-page questionnaire to applicants seeking an exemption, asking, among other questions, whether they’ve met with affected unions.
- Steve Smith of the Labor Fed: “We are just simply helping the author collect the information. She is making all the decisions.”
- Gonzalez-Fletcher said she had never seen the form but was not offended by it: “We have the same values and same perspective.”
How the Vote Went Down in the California State Senate
All Republicans Voted NO.
All Democrats Voted YES.
How does AB 5, now Chapter 296, affect California workers and businesses?
Assembly (AB) Bill 5/Chaptered Act 296 (2019, Lorena Gonzalez-Fletcher - D, San Diego) is a new law that makes drastic changes to a worker’s status as an independent contractor or an employee.
The new law no longer allows workers to decide if they are running an independent business or if they’re an employee working for a business that sets their working conditions and pay.
The new law is based on a ruling in Dynamex Operations West, Inc. v. Superior Court (Dynamex) that establishes a three-pronged analysis, called the ABC test, that businesses must use to determine if a worker is an employee or an independent contractor.
The problem with the decision is that it applies broadly to all business arrangements; it was not limited to Dynamex workers. AB 5 codifies the decision.
The bill’s sponsor, Assemblymember Lorena Gonzalez-Fletcher has stated numerous times that the bill was intended to expand collective bargaining through union representation. Unions played a large role in deciding which industries would get a government carve-out.
How are workers affected by losing their independent contractor status?
Many workers prefer to provide services to businesses through their own businesses in order to set their own hours, work in a place they select, perform only the tasks they want to do, and perform work for more than one business.
In losing their status as independent contractors, workers lose the freedom and flexibility as well as control of how much money they make and how much they pay in taxes and when.
These entrepreneurial small business owners, receive state and federal tax breaks for equipment, office space, vehicles and other items they use to provide services.
In addition, independent contractors have the security of working with as many businesses as they choose, which protects them from being let go if a business they work for decides to reduce the number of people working for it, relocates, or closes.
What Other Ways Could Worker Status Have Been Determined?
California State Senate Republicans worked with many local and state organizations and associations to develop an alternative approach to AB 5.
Senate Republican Leader Shannon Grove (R-Bakersfield) introduced Senate Bill (SB) 238, which would have allowed independent contractors to maintain their independence by determining worker status under factors outlined in federal law. Those factors have been in use for decades and have been interpreted by the U.S. Department of Labor and many courts to clarify the classification process.
The federal law places greater emphasis on the total relationship between the worker and the hiring business to figure out if the work performed indicates a worker is an independent contractor or employee. Read SB 238 Analysis (doc)
What Happened to Senate Bill 238?
Democrat Senators, who are in charge of every committee and leadership position in the State Senate, killed SB 238 in its first committee hearing without any compromise or amendments.
The Democrat Senators ignored the thousands of independent service providers who wanted a compromise that would allow them to choose to continue being independent contractors.
Does AB 5/Chapter 296 Treat All California Workers and Industries the Same?
NO! During the legislative process, certain industries demanded and received special exemptions from the law. The list of industries below can continue using the "Borello Test" for determining whether a worker is an independent contractor or employee:
- Doctors and veterinarians
- Some licensed professionals -- lawyers, architects, engineers
- Insurance brokers, accountants, securities broker-dealers, investment advisors
- Real estate agents
- Direct sales representatives paid for actual sales
- Commercial fishermen
- Construction subcontractors
- Professional service providers -- marketing, human resources graphic designers, freelance writers, photographers
- Hair stylists, barbers
- Licensed estheticians and manicurists
- Private tutors
- AAA-affiliated tow truck drivers
- Newspaper carriers (exempted for one year only)