AB5 puts into law a California Supreme Court decision making it harder for companies to classify workers as independent contractors. The bill would make those companies classify their workers as employees instead.Here are some of the issues with this bill:
Last month, Uber and other app-based businesses that rely on gig workers said they would spend $90 million on a ballot initiative that would exempt them from AB5, if it becomes law.
While the bill's impact on gig economy companies has drawn most of the attention, it would affect a wide array of industries.
But on Tuesday, California's State Senate passed a bill that threatens to destroy all that. Assembly Bill 5 (A.B.5) would require companies like Uber, Lyft, DoorDash, and more to treat contractors like employees. This would involve offering benefits like sick and vacation days, health insurance, and other "protections" under the Fair Labor Standards Act, Americans with Disabilities Act, or the Civil Rights Act. Minimum wage, overtime pay, and unemployment insurance would also be involved.Another view:
All this can add 30 percent to labor costs, hitting gig employers hard. Yet all this also undermines the basic idea of the gig economy, by trying to pigeonhole flexible gig workers into the traditional employee mold — with set hours, company equipment, and a company workspace...
In the health care sector, doctors, dentists, psychologists, and podiatrists are exempt from A.B. 5, but many other medical professionals — like behavioral therapists and optometrists — are not. Hospitals rely on independent contractors to fill gaps when employees are on leave. These contractors, like gig economy workers, value their independence and autonomy.
Newspapers and other media outlets also use independent contractors to deliver papers to homes and businesses. New language was added to the bill exempting freelance writers and photojournalists from the rules, but only if they send in 35 or fewer submissions to a single publication in a single year. Requiring papers to hire delivery workers as employees could add 30 percent to labor costs, further weakening the viability of local newspapers.
Many of California's 70,000 truck drivers own their own rigs in order to work independently...
Ironically, the bill may also hit franchisers who operate as small business owners. California has 76,000 franchise businesses, and an expert warned that A.B. 5 "would essentially convert these business owners into employees overnight." Anyone who owns a McDonald's or other franchise would become an employee of McDonald's, and so would all their workers. This would require enormous restructuring across various sectors of the economy.
Language translators, youth sports coaches, and some nonprofits have sought exemptions or registered objections to A.B. 5. Said's article also noted that independent musicians, who hire engineers, dancers, background vocalists, and other contract workers, may have to formally employ them under the bill when it becomes law.
Liberals have hailed the bill as an opportunity to give many workers "basic labor rights for the first time," but people do not join Uber or Lyft as contract drivers in pursuit of a 9-5 day job. Organized labor and government-mandated benefits are Kryptonite to the gig economy — and many more contractors.
Janitors cleaning downtown office buildings, truckers loading goods at the ports of Los Angeles and Long Beach, construction workers building new homes, manicurists, medical technicians, nightclub strippers and even software coders would be among scores of occupations offered protection against long-documented workplace abuses...It's not "misclassification" just because you disagree with it, LA Times.
Some 400,000 Californians are estimated to work either part-time or full-time for fast-growing platform-based technology companies, offering an array of services such as rides, food deliveries, household repairs and dog-walking.
App-based companies argue they offer a different employment model — innovative and flexible — and should thus be exempted from AB 5. They say that as contractors, their workers can set their own schedules and work for multiple companies. AB 5 could cost the firms millions of dollars, hindering future profitability...
State officials estimate California loses some $7 billion a year in payroll taxes due to misclassification. Nor do companies pay Social Security or Medicare taxes for contractors.
What does economics tell us is going to happen, both to gig economy jobs and to prices? Does anyone else think this is driven in large part as a payoff by Democrats to unions?
Update, 9/16/19: I'm not the only one who thinks it's for unions:
California’s new law aims to force the likes of Uber, Lyft and Postmates to classify workers as employees, not independent contractors. But the main force pushing for the law is organized labor, because these arrangements make unionizing difficult.
Sure, advocates claim the idea is to make companies offer benefits like health insurance and end exemptions from minimum-wage and overtime laws. Yet everyone working as an independent contractor knows the deal before they sign up. They take it because they see other benefits, from the ability to work for many different “bosses” to the power to control their own work schedules.
And the California law already has lots of happy workers worried....
There are many people who need to work part time, such as students and retirees, who like the flexibility of having control over when and how long they work. Although we're basically retired, my husband transports cars between dealerships. Sometimes those trips are just from one suburb to the next or like today, they are between Dallas and Houston or Dallas and San Antonio. A law like this in Texas would eliminate his job and force the company to more expensive means to exchange a red truck for a gray one in another city. Those costs would be passed along to consumers.
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