Enter California and AB5, the anti-Gig Economy law:
AB5 took effect on January 1, and it’s already causing trouble. A limit on the number of articles that freelance writers could produce for one publication resulted in layoffs for some California journalists and a First Amendment lawsuit from others. Workers in more than 135 occupations claim that losing contractor status hurts them, while independent theater and arts groups are facing thousands of dollars in costs they can’t afford because they must now treat staff as employees. Lorena Gonzalez, the assemblywoman who wrote AB5, has introduced another law to remove the article cap for writers and address the status of musicians. A sign of poor legislation is the need to rewrite it immediately after it takes effect.I wonder if any of our legislators ever took an economics course.
Uber is making changes to its app to avoid triggers that define “employment” under the law. If this workaround proves successful, then the industry that AB5 targeted will remain untouched, while other businesses will face its burdens—and other workers will lose opportunities. Trucking companies have gotten a restraining order on applying the law to their operations. The process of negotiating exemptions and modifications to the law is making progressive California a bastion of crony capitalism, with favored or powerful classes writing themselves in or out of regulation. Poorer workers and smaller companies and industries, without access to lawyers or lobbyists, will lose out. In this vein, Uber, Lyft, DoorDash, and others are planning to spend more than $100 million on a ballot measure to overturn AB5—but only for app-based drivers, leaving everyone else, from translators to rehab assistants, out in the cold.
Update, 2/23/20: Here's more, and from a CPA who admits to being a life-long Democrat:
It’s been 6 weeks since AB5 was signed and put into effect. We’ve now had 6 weeks to see some actual results. So, as a CPA with clients in the Independent Contractor world, and as a lifelong Democrat whose Assemblyperson and Governor actually voted for this shitshow that is AB5, I need to ask: What were you thinking?Heckuva job, Gavie.
After reading the actual law, listening to interviews, and taking numerous courses on AB5, I simply don’t know what the thought process was behind AB5. What was the goal? Because, if it was to “protect California workers”, you’ve done an abysmal job of that...
The laws were there. You just needed to enforce them. Instead, you took a single legal case, Dynamex (where one single company decided to break the rules and throw all their employees to IC status), and you brought the hammer down. On everyone. You have decided to ruin the livelihoods of 1-2 million true California independent contractors because someone somewhere screwed up on, what, 1,000 classifications? That’s some serious overreaction and, might I add, a rather large amount of California citizens to consider acceptable collateral damage...
In other words, AB5 will put these professionals out of business and they will close their LLCs, partnerships, and corporations. And it won’t be because of the expense of payroll taxes. It will be because they can no longer operate the businesses they previously legally established due to not receiving payment/income in the form necessary for proper tax reporting purposes.
It has turned their income tax and business worlds upside down. But I was naïve. AB5 has resulted in far worse than that.
Instead of switching ICs to employees, many hiring companies have simply cancelled contracts. Period. Done. Work gone. Needless to say, that sound you heard was 1 million independent contractors finding out they no longer have a source of income.
And who’s getting these jobs? OUT-OF-STATE employees, because, lo and behold, your little AB5 states that California companies who hire out-of-state ICs aren’t affected by AB5.
1 comment:
The mistake is in thinking this was meant to help people. It wasn't. Its only purpose was to try to drive people to unions.
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