Assembly OKs bill on gig-work rules
Legislation lays out 3-part criteria for contractor status
The Assembly on Wednesday passed “gig work” legislation that could send seismic changes across California’s employment landscape if passed by the Senate and signed by the governor.
Hundreds of thousands of independent contractors, ranging from Uber and Lyft drivers to manicurists, could become employees under AB5, which codifies a groundbreaking California Supreme Court decision known as Dynamex.
The court decision and the bill both apply three-part criteria, called the ABC test, to determine whether a worker is an employee. To be a
true independent contractor, it says, a worker must be free from a company’s control, doing work not central to the company’s business, and have an independent business in that trade.
The bill’s author, Assemblywoman Lorena Gonzalez, D-San Diego, said that companies often classify workers as independent contractors to duck laws governing minimum wage, overtime, workers’ comp, disability and other benefits. Many experts say reclassifying workers as employees can add 30% to a company’s labor expenses.
AB5 “will give certainty to the businesses of California, give certainty to the workers, certainty to the taxpayers,” Gonzalez said on the Assembly floor.
“This is a monumental victory for California’s working people,” said Steve Smith, a spokesman for the California Labor Federation. Organized labor strongly backed the bill, which has the potential to create new classes of employees who could become union members. “This sets a standard that allows California workers to succeed and to enjoy the basic protections all workers should have.”
But many businesses large and small said the bill would devastate them, and some independent contractors said they feared loss of the flexibility that is key to their lives.
“Small businesses rely heavily on third-party providers because they don’t have the wherewithal in many cases” to hire employees for some tasks, said Jack Frost, president of Pro-Small Biz California. “Independent contractors help create efficiencies and a profitable bottom line.”
The bill passed 53-11. But even many of its supporters said they felt it needed revisions before going through the Senate, notably exempting more professions and industries, as well as small businesses, from its provisions.
So far, the bill exempts doctors, dentists, lawyers, architects, accountants, engineers, insurance agents, investment advisers, direct sellers, real estate agents, hairstylists and barbers who rent booths at salons, as well as marketers and human-resources professionals with advanced degrees.
But the California Chamber of Commerce and the I’m Independent Coalition of businesses seek a lengthy list of further exemptions, including ones for short-term projects, business-to-business contracts, and people who like to control their own schedules, such as Uber/Lyft drivers, newspaper distributors, taxi drivers, truck drivers, consultants, travel agents, caterers, freelance writers, graphic designers and more.
Language translators would be hit particularly hard, said Naomi Bowman, president of DS-Interpretation, a South San Francisco firm that provides interpreters for conferences and other events.
“Such workers are not mere ‘side-gig’ workers in a new economy but true, professional, highly-skilled independent contractors who operate independent businesses with dozens or hundreds of clients,” she said in an email. “They want to and should be allowed to remain independent contractors.”
Otherwise, she said, language interpreting will be outsourced to other states or countries.
Although at least 2 million Californians work as independent contractors, much attention has focused on Uber/Lyft drivers. Many drivers and their companies say they fear losing flexibility.
“Lyft drivers overwhelmingly prefer the freedom of working where, when, and how much they want,” Lyft said in a statement. “Many are moms, students, seniors or veterans and 75 percent of them drive less than 10 hours a week.”
While Lyft said AB5 “would force ridesharing drivers into shift work, eliminating the control drivers currently have over their own schedules,” backers of the legislation disagreed.
“There is nothing in the law or the bill that says they cannot provide the exact same flexibility they do now,” said Smith from the California Labor Federation. “Drivers could still go on the app and decide when to drive. Nothing would preclude Uber (or Lyft) from allowing that to happen.”
Edward Escobar, a San Francisco Lyft/Uber driver who also works with the Alliance for Independent Workers, an organizing movement for drivers and others, said he and many other drivers are fine remaining contractors as long as they truly are independent.
“An electrician or plumber sets their own rates, terms and conditions,” he said. “That’s what we want. Uber and Lyft have done a bait and switch; they are undermining what it means to be an independent contractor.”
The bill’s economic impact is still under debate.
On one hand, Gonzalez said, California “loses upwards of $8 billion a year because of lost wages, lost taxes and expenses as a state when companies misclassify workers,” noting that taxpayers subsidize social-safety net assistance for misclassified workers.
On the other hand, businesses said they’d be forced to pass along higher costs to customers.
“That’s the argument they use for any worker protection, whether minimum wage or sick days,” Smith said. “In practice, this has potential to have a really positive economic impact on both consumer spending and public services. There’s a clear benefit to increasing the buying power of workers by ensuring they get paid a fair wage. “
Also up in the air is how reclassification might actually occur if the bill becomes law. Many gig workers have agreed to handle disputes through arbitration, which precludes them from filing class-action lawsuits. A California agency such as the Labor Commissioner’s Office might need to step in.