California’s AB5: Will Gig Economy Workers Get a Fair Shake?
Assembly member Lorena Gonzalez’ legislation (AB5) resolving questions arising out of the California Supreme Court ruling on employee classification in Dynamex Operations West, Inc. v. Superior Court of Los Angeles is headed for a final reckoning.
AB5 passed the Assembly in May. It will be heading to the full Senate floor in September, and lobbying is intense. Various industries are running “doom and gloom” ads. Petitions are circulating.
It looks like AB5 will pass, though the jury is out on what kind of last minute changes could get made. And Gov. Newsom has been wishy washy about whether he’ll sign it.
Presidential candidate Sen. Elizabeth Warren weighed in with an op-ed favoring passage in the Sacramento Bee. Sen. Bernie Sanders announced his support. If passed, this bill will inspire others nation-wide.
A snip from Warren’s op-ed, which has reverberated nationally:
From children working in coal mines to women locked inside dangerous factories to migrant farmworkers laboring under inhumane conditions, American history is full of shameful examples where powerful industries exploited workers in pursuit of greater profits.
Their methods have changed over the years, but companies’ drive to cut costs and boost profits at the expense of workers’ wellbeing has not.
In many industries today, it takes the form of worker misclassification.
Misclassification works like this: Companies label their workers as “independent contractors” rather than full-fledged employees, allowing employers to deny workers basic protections like the right to organize, wage and hour laws, health care coverage and protections against sexual harassment.
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California-based advocacy organizations Gig Workers Rising and Mobile Workers Alliance have organized a caravan of Uber and Lyft drivers, who will drive from SoCal through San Francisco to Sacramento, next Monday, August 26 through Wednesday, August 28th.
Over 200 drivers in more than 75 cars plan to drive south to north, with more drivers joining along the way, with stops for “dramatic action” advocating for AB5. Uber headquarters in San Francisco and the steps of the State Capitol in Sacramento are likely locations.
Techcrunch interviewed driver/activist/organizer Annette Rivero:
...[AB5] is doing is defining even more what it means to be an employee and what it means to be an independent contractor. It doesn’t do anything else in my opinion. If there was something on the table about creating the appropriate protections, that applied more to gig workers for lack of a better word, I’m sure everybody would be looking at that.
But there isn’t, so this is what we have. And instead of having people working without protections and for extremely low labor costs, we have to do something. Because there’s a lot of people out there who are barely making it, barely surviving, can’t even put food on the table, can’t even afford healthcare.
And these companies should be held accountable for it. They should be held responsible for it.
It’s their responsibility as a business owner to give back to the community, not just take from the community. Redefining these two things is just going to help make that happen.
Trucks driven by “owner operators” filled streets around the state capitol in July, hoping for an as-yet-to-be-gained exemption. Drivers are motivated by threats from the companies, who say the additional costs associated with paying for employee status will cause them to stop outsourcing jobs.
The industry has a terrible record when it comes to misclassifying drivers. Over the past four years, the California Labor Commissioner has ruled 36 separate times against one company, saying drivers were misclassified as independent contractors, and awarding $7.3 million in unpaid wages. Some drivers ended up having to pay the companies after "expenses."
Lawsuits over the application of the Dynamex decision have made legislators wary of negotiating an exception. Trucking companies are hopeful for a court ruling saying federal law preempts state regulations.
Assemb. Gonzalez has amended the bill to exempt professions such as insurance brokers, licensed doctors, financial advisers, salespeople, cosmetologists, lawyers and other professional services.
The advent of gig centered jobs didn’t make companies into good guys. Circumstances surrounding the capitalization of these companies all but ensured that despite the best of intentions sooner or later investors would need to see exploitation of workers as their path to long term profitability.
The Dynamex court ruling established a three-part “ABC” test used to determine employment status.
Workers can be classified as independent contractors in California if they are (A) “free from the control and direction” of the company that hired them, (B) the worker is performing work that falls “outside the hiring entity’s usual course or type of business,” and (C) the worker has their own independent business or trade beyond the job for which they were hired.
Today’s Union-Tribune features a “both sides” discussion featuring Assemb. Lorena Gonzalez and tech entrepreneur Michael Robertson.
Gonzalez starts out with a real-life example of a 60 hour a week Lyft driver who’s seen his take decline by half over the past six years, even as the company raked in $20 billion from an IPO:
In California, when companies don’t compensate their workers correctly, it’s the taxpayers who are left holding the bag. Through programs like Medi-Cal, CalWORKS, CalFresh, subsidized housing, free lunch programs and even the Earned Income Tax Credit, we fill in the gaps left by greedy employers who don’t fairly compensate their employees to ensure workers don’t fall too deeply into poverty.
Why should we subsidize a corporation’s workers while its CEOs and CFOs become billionaires? We shouldn’t. People working 40, 50 and 60 hours a week should be able to make ends meet without taxpayer help.
Gig companies opposed to this bill are lying to their workers and the public by claiming workers will lose flexibility without independent contractor status.
To be clear: There is nothing preventing these companies from continuing to offer flexible scheduling. Flexibility is and will always be at the employer’s discretion.
Robertson frames the battle over the bill as union-funded politicians acting as bosses.
Politicians loudly trumpet they are “giving” workers vacation time or maternity leave or overtime pay. Of course they can do no such thing because they make nothing to give. Instead they’re transferring money to political favorites from other sources. It’s their new favorite form of welfare where the promise comes from Sacramento, but the messy part of pushing a tax hike or moving money from other areas is avoided. Instead, businesses are forced to pay.
The negative impact to businesses and therefore the economy is wide-reaching. There’s the direct cost of the government-mandated compensation and benefits, but also rigidity in labor deployment and costs to the overall hiring and firing process. Consequently, labor becomes substantially more expensive and terminating employees is fraught with rules and requirements.
The common refrain is the monies will come from company owners, who are routinely billed as evil profiteers. However, most businesses operate on tiny margins and new costs are not easily absorbed by profits. Instead they must make tough decisions to lower quality, hike prices, lower service, outsource, automate, reduce hours or even terminate positions.
Left out of the business side of the equation here is the simple fact that --whatever you call them--people can’t afford to live on the wages being offered. The concept of not paying people enough to live on may be popular in some circles these days, but --trust me on this one-- it is not sustainable.
The state played no role in reducing the rates (twice in the past year!) paid to Uber and Lyft drivers. As these companies have reduced pay, the taxpayers are getting stuck with the cost of goods and services workers need but can no longer afford. Since these gig companies typically pay little to no taxes, it’s like welfare for the rich.
One final note: it ain’t over ‘till it’s over.
From Ben Adler at Capitol Public Radio:
The leader of the California state Senate says negotiations over whether gig economy workers at companies like Lyft, Uber and Postmates should be classified as employees will likely continue into next year, and not be included in the legislation lawmakers are expected to pass by the time they adjourn next month…
...Although the ruling affects industries far beyond tech platforms, some companies — including Lyft, Uber and Postmates — are seeking a compromise with unions under which they would extend benefits to their workers while still classifying them as independent contractors.
Atkins was answering a question about the potential for such a compromise. She indicated that a bill which would codify the Supreme Court ruling into state law, AB 5 by Asm. Lorena Gonzalez Fletcher (D-San Diego), will move forward this year.
“I think at some point, we move forward and we take action on this piece of legislation,” Atkins said. “And there’s no doubt in my mind that we probably have more work to do going into next year, as we continue to have conversations throughout the state for various professions.”
The question becomes, “What will compromise look like?”
Let’s go back to Senator Warren’s op-ed on that:
...some of the most powerful gig companies have brought in armies of lawyers, lobbyists and consultants to spread disinformation and either kill the bill or water it down so it doesn’t give workers the rights and benefits they deserve. These companies’ approach would do little but sow confusion and uncertainty by adding other, still undefined, classes of workers whose rights are unclear – and perhaps unenforceable.
Lorena Gonzalez has a deserved reputation as someone who will fight for what’s right. And she has a better track record than anybody else when it comes to passing what Chambers of Commerce call “job killer” legislation. Taking on the ‘bros’ of Silicon Valley may be her biggest challenge to date.
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Get’em while they’re hot! The GOP is selling tee shirts with Greenland as part of the United States. I’m sure the idea is to “trigger the libs.”
But... Greenland is 88% Inuit or Inuit-mix and only 12% European, the two major parties are the Social Democrats and the Inuit Communists, and they've grown up with Scandinavian-style universal healthcare, debt-free university, etc.
So, hey, if the people there want in, maybe we should consider it...
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