AB5, the new law now in place here in California as of January 1, ostensibly passed to "protect" workers exploited by companies misclassifying them as independent contractors, has wreaked so much havoc that careers are being decimated -- contracts lost, potential gigs eliminated -- all because of a lack of understanding by lawmakers in support of it about the wide spectrum of the ways the "gig economy" works.
The one thing it is NOT is a partisan issue, though defenders of AB5 try to paint hard working professionals in opposition to AB5 as some sort of right-wing nutter base trying to flip the state Red. People and businesses across every demographic are hurt by a law passed by, yes, Democrats, but it's harming what is a natural target voter base as well. Markos Moulitsas at Daily Kos, no Red State or Town Hall, btw, made clear in his post, "Democrats across the country seek to make California's mistake, destroying careers of freelancers," that this now-national issue (see House Bill 2474) is an albatross around the necks of this state government and other states proposing AB5-clone bills.
Note that existing state law in California, and federal law, already punishes misclassification of employees as freelancers, when they should be employees. None other than DNC Chair Tom Perez, when he was Barack Obama’s labor secretary, aggressively fined bad actors. Meanwhile, Democrats across the country now are playing copycat to a law that its very own author, Assemblywoman Lorena Gonzales, admits was arbitrary. Literally. "Was it a little arbitrary?” said Assemblywoman Gonzalez. “Yeah. Writing bills with numbers like that are a little bit arbitrary.”
Legislation impacting people’s ability to live should never be arbitrary.
One of the largest grassroots Facebook groups where discussion about the impact of the law is Freelancers Against AB5. It serves as a clearinghouse of education, information, and strategy for citizen activism of the self-employed harmed by the law. One member, Peter Kalivas, has spent a good time digging and researching how this misguided law will not stand legal muster and muses aloud why this bill exists at all. From his post (this group requires subscription/admission, I added ref links):
Everything I write is based on research I have done, and I could provide documentation to support my statements.
In the opening text of the AB5 Bill/Law, the Dynamex court case is referred to as its inspiring incident. Therefore, I think it is important to review that case for context before I proceed with my feedback about AB5 - because it is relevant.
The Dynamex court case decision was based on the complete opposite of the AB5 construct. Between 2004-2005, Dynamex de-classified employees WITH benefits into independent contractors with NO benefits, as an effort to save money. This case was brought by a small group of drivers who after 3 months of transition realized they preferred being employees, and filed a misclassification lawsuit.
I have access to testimonials from other Dynamex workers who ultimately appreciated having the new option to accept and refuse work; due to the new flexibility independent contracting gave them. Ultimately, the court decision took away all Dynamex worker’s right to choose which employment situation they preferred resulting in the construct of the ABC test to more specifically determine what an employee was despite that already being defined at the federal level.
The Dynamex couriers who appreciated and preferred the transition into an independent contract have since spoken out against those who brought on the original court case.
So the point of AB5 as a response to the Dynamex case is a very challenging rationale to resolve that elects for some less clear reason to take away the rightful and legal option for persons to choose their own working conditions that best suited THEIR needs. As a failed attempt to course correct the misclassification of workers, AB5 has confused what an “employee” is while separating U.S. citizens from their right to choose the conditions of how they choose to work under legal federal codes and allowances.
So now there are multiple sources applied at the state level that have various definitions of what an “employee” is and what self-employed is. It could be presumed that our FEDERAL government’s definitions hold the highest authority over the State. But AB5 does not follow that rationale.
The IRS was formed in 1862 and at the Federal level we have two classifications of work in the U.S. - Employee and Self-employed. And according to a 2019 survey in USA today 1/3 of Americans are independent contractors – thousands of people who contribute to the economic vitality of our country.
As of today, the Internal Revenue Service (IRS) at IRS.gov defines an individual who works as an independent contractor or owns a business as a sole proprietor or partner is self-employed.
Furthermore, the California Employment Development Department at EDD.CA.gov takes its definition of self-employed from the IRS, which it must then use to follow the definition of what self-employment is - which is either: a self-employed individual, independent contractor, or general partner.
So with this in mind…why then, is a current State Assemblymember using the Dynamex case from 2005 to inspire the formation of AB5 in 2018? Perhaps the Labor Unions involved in AB5 think the now 14-year-old Dynamex case was an opportunity to manipulate the Federal definition of what “self-employed” means or doesn’t mean for a more defined purpose.
Assemblymember Lorena Gonzalez-Fletcher (@LorenaAD80), can you please provide documentation that gives you the authority (as a state-level official), to obtain an exemption for the State of California to use a different definition of self-employment than the IRS? What gives the State of California the authority to use a different definition of employee or self-employed in any new way it wants, and one that is different than the highest level of government?
The California EDD website states, “As of January 1st, 2020 all workers are now employees.” The term “worker” can either mean an “employee” or an “independent contractor.” Without justifying documentation to decipher which definition to use (EDD or IRS) - it is not convincing that AB5 is even legal or enforceable.
Let me be clear, the Borello and the ABC tests were devised to determine what an employee was, NOT what self-employment was, because self-employment is already defined at the Federal level.
Applying theses tests to a person who has declared and can prove themselves, as defined by the IRS as self-employed is then irrelevant.
Next feedback point is that…
AB5 contradicts itself and lacks an open transparent process in the following ways:
In the opening text of AB5, it refers to WAGE ORDERS of which there are 17 that describe which fields and occupations are exempted already from employee status, including how and why.
So, here is the contradiction within AB5…
We have the Wage Orders referred to, (code 10-1002, a previously existing document applied to AB5 says Creatives and the Professional Performing Arts are already exempted from being defined as employees), and then we have a totally different document created for AB5 that does not exempt Performing Artists. Instead, it lists a Fine Arts exemption determined by privileged parties including representatives of labor unions through a conflicted process.
The exemption process, I argue is contentious because we, (the workers of California), were not all equally privileged to understand, nor participate in the process of how exemptions were determined. All businesses (for profits and nonprofits alike) need be registered with the state, so we could have easily received a notification from the Secretary of State and/or Attorney General about how our specific business can go about seeking an exemption.
Speaking of enforceable documents…
SB 459 signed by Governor Jerry Brown in 2011 specifically deals with the overt misclassification of workers. When pressed about this bill, ASM Gonzalez-Fletcher stated SB 459 wasn’t enforceable and yet, there have been numerous court cases that clearly demonstrate that it has been.
Several California Senators and Assemblymembers I have spoken to, publicly agree - including those who have since flipped to agreeing that AB5 may not be enforceable for the reasons I state. The state does not have higher authority than the federal government to redefine what an employee is, nor completely ignore the federal definition for self-employed.
AND so before I ask my clarify question, here is my final statement:
I have demonstrated that I have spent time doing the investigative research relating to AB5; and I am not convinced the author, nor its sponsors have.
There are too many discrepancies that make this bill (which is now a law), challenging to acknowledge.
AB5 is based on an assumption that self-employed people are in need of help from themselves because they are incapable of negotiating the terms and conditions of their own contracts to provide services of their own creation. Something 1/3 of self-employed Americans across the United States have CHOSEN to do for over 100 years. AB5 now takes away that legal choice for so many.
One final thing the author does not understand or acknowledge is that long term, Full-Time jobs (with benefits), with one exclusive employer for Professional Performing Artists RARELY exists, with minimal exceptions including union jobs across the United States. Most artists work on a project, gig, event, short term, or seasonal basis - and this is standard practice in our industry.
In closing, I would like to ask my one clarifying question:
What IS the real reason for AB5?
Peter G. Kalivas, PGK DANCE!
My commentary/response after the jump...
My response:
BRAVO. We need our stories up front, but simultaneously gathering the data and research to defeat this legally is the long-term gain for everyone.
What is painful is that this battle has just begun because our voice is currently outspent and outpositioned by LG and Big Labor, and there are those all too willing to make this a partisan issue rather than the issue of power corrupting common sense. AB459, as we've hammered over and over, is the big elephant in the room - a law that could have adequately addressed harms by Uber or any other company allegedly misclassifying, but thirst for control of the freelancer class ultimately was added into the mix as well, putting politics over a portion of the "gig economy" that was not in need of saving or protecting. And thus, AB5.
The fact that so many weren't even aware (and still not aware) of AB5 being in place (and $20M at the ready to enforce and fine) tells us all we need to know. No mailing out to residents on a law affecting hundreds of thousands of people directly in their pocketbook? Nothing to small businesses that hold an LLC or other entity? Having ill-equipped EDD officials holding seminars that leave concerned and anxious sole proprietors who want to comply left with little useful information?
Assemblymember Gonzalez's ignorance of the many affected professional areas (learning after the fact is, quite frankly, an embarrassment) is awful, and the profanity and unbecoming nature of engagement as an elected official, astonishing. It would be one matter if this bill's conception and roll out was a mistake, but it was not.
Self-employed professionals don't seek to undercut those under the thumb of big business skirting the law, and don't appreciated being tarred by pro-AB5 forces as against protections. We are against overreaching bad law. And no law is well-written if it needs dozens, if not hundreds of exemptions. Especially if exemptions are obtained by "random" professions no more important (but have clout and presence) than another that was not invited to the table.
So I thank everyone for reaching out to their lawmakers. There is strength in numbers. It is about the WE, not the ME.
Read up...
- California's AB5 - wreaking havoc for independent contractors
- Independent contractors both helped and hurt by CA's AB5 (Pam)
- AB 5 - CA’s New Independent Contracting Rules (exemptions)
- Why misclassification is a problem
- Will This California Law End Freelance Work?
- What You Need to Know About the AB 5 “Business-to-Business” Exemption
- How a New Law Will Change California Show Biz
- Vox Media cuts hundreds of freelance journalists as AB 5 changes loom
- Pam on Michelangelo Signorile Show re: AB5 (Dec 30).
- What is independent contractor versus employee (State of CA FAQ)
- Employment Determination Worksheet (State of CA PDF checklist test)
- How to find your lawmaker to write/call: http://findyourrep.legislature.ca.gov
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