AB 5 is a Lose-Lose Situation for Gig Economy Workers and Independent Contractors | Citizens Against Government Waste

AB 5 is a Lose-Lose Situation for Gig Economy Workers and Independent Contractors

The WasteWatcher

One of the great advantages of living in the United States is the ability to be your own boss, set your own hours, and control your own life.  These independent jobs have traditionally included freelance writers, tutors, music teachers, real estate agents, physical therapists, truckers, doctors, lawyers, and hairdressers.  In the past decade, these jobs have expanded to app-based gig economy workers like Lyft and Uber drivers, Instacart delivery drivers, and similar activities.  But many of these jobs, including all of the app-based workers, have been threatened in California since Governor Gavin Newsom (D) signed into law AB 5 in 2019. 

According to the Internal Revenue Service (IRS), California currently has the highest number of independent contractors.  AB 5 has led to an unnecessary loss of jobs on top of the jobs that have been lost during the pandemic.  While the impact on app-based workers is uniformly devastating, the impact is uneven for traditional jobs.  AB 5 excludes hairdressers but not nail salon workers, doctors but not physical therapists, and grant writers but not freelance writers.

According to the California Labor & Workforce Development Agency, anyone found to be in violation of this law is subject to between $5,000 and $25,000 per violation. Governor Newsom has further threatened to penalize those who misclassified employees as independent contractors based on the law’s current definitions.  

There have been lawmakers and groups working to repeal Assembly Bill 5.  

With many schools closed during the coronavirus pandemic, parents have been turning to independent tutors to help meet their children’s educational needs.  However, these parents cannot just hire them as independent contractors since the state would require the tutors to be defined as employees with full benefits.  Most families cannot afford to provide tutors with the same benefits as an employee, which will leave tutors struggling to find work, and cause children to fall behind in their education.  Carl DeMaio of Reform California started a petition with several school districts to suspend AB 5. 

On August 10, 2020, California won a lawsuit that would force Uber and Lyft to classify their drivers as employees.  Both companies threatened to suspend service and leave the state.  However, opponents of AB 5 were able to get a ballot initiative for the 2020 election that would exempt app-based workers from the anti-free market law.  A judge stayed the impact of the law on the industry until after the vote on the referendum. 

Assemblyman Kevin Kiley (R-Rocklin) tried to amend the economic stimulus package with a measure to repeal AB 5 for everyone other than app-based workers on August 24, 2020.  He called on California lawmakers and Gov. Newsom to “be on the side of the people of California” before the legislature adjourns.  But the Assembly voted to lay the amendment on the table on the same day.  In February, 2020, Assemblyman Kiley and Assemblywoman Melissa Melendez (R-Lake Elsinore) introduced legislation that would repeal the law, but it failed to pass the Assembly Labor and Employment Committee. 

While efforts continue to repeal AB 5, the House of Representatives passed the Protecting the Right to Organize (PRO) Act in February 2020 by a vote of 224-194.  Along with significant changes to the labor laws that enhance union activity and membership, the PRO Act included language similar to AB 5.  Democratic presidential nominee, former Vice President Joe Biden has endorsed AB 5 and the PRO Act, and wants it to be national law. According to his campaign website, he wants to “aggressively pursue employers” who violate labor laws including misclassifying employers to independent contractors. 

Not only has former Vice President Biden endorsed the PRO Act and AB 5, but he also plans to “go beyond the PRO Act” by enacting legislation that would impose strict penalties on corporations and “hold company executives personally liable when they interfere with organizing efforts, including criminally liable when their interference is intentional.”

Californians should continue to support efforts to repeal AB 5, and the PRO Act cannot be allowed to become federal law.  The more regulations imposed on independent contractors and the gig economy, the more harm will be felt across the economy.  During the coronavirus pandemic, individuals, families, and businesses have been struggling to make ends meet.  Keeping AB 5 alive in California or expanding it into federal law will only prolong their suffering.  

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