Assembly Bill 5, which tightens up the legal definition of employee and codifies a state Supreme Court decision, is still highly controversial and the last word on its effects has yet to be spoken.
When the Affordable Care Act, otherwise known as Obamacare, was awaiting final congressional action in 2010, House Speaker Nancy Pelosi, in a speech to county officials, uttered 24 words that have haunted her ever since.
Referring to the controversies that surrounded the groundbreaking legislation, she said, “But we have to pass the bill so that you can find out what is in it — away from the fog of the controversy.”
It was immediately interpreted — misinterpreted, she has insisted — as meaning she and other Democrats were jamming Obamacare through Congress without knowing its ramifications.
California’s Democratic legislators now face a similar situation vis-à-vis legislation they passed last year that would outlaw free-lance or contract working arrangements of hundreds of thousands of Californians.
Assembly Bill 5 codifies a state Supreme Court decision defining who can and cannot be considered a contract worker. It’s aimed, its labor union sponsors and legislative supporters say, at the “misclassification” of workers as contractors, which denies them the benefits and protections of being payroll employees.
Its specific targets were “gig economy” companies such as Uber and Lyft and one motive behind both the lawsuit that produced the Supreme Court ruling and AB 5 was creating new opportunities for union organizing once workers became payroll employees.
The unions and the author of the bill, Assemblywoman Lorena Gonzalez, a San Diego Democrat, gave exemptions to a few categories of work. But it’s drawn criticism from artists, photographers, dancers, musicians, journalists and many other freelance workers who say it has damaged their incomes because employers shied away from giving them non-payroll work.
It’s also created great uncertainty on how it might be applied to whole industries. Could, for example, owners of fast-food restaurant franchises be considered employees of the parent franchising corporations?
As the Legislature reconvened this year, dozens of bills were introduced to carve out more exemptions. Meanwhile, the trucking industry has tied up the legislation in court vis-à-vis independent truckers. And Uber and other transportation and delivery services are sponsoring a ballot measure to exempt themselves from the measure.
Republicans drafted most of the bills. Although they are powerless to pass anything in a Legislature dominated by Democrats, they believe that the backlash from free-lancers — most of whom are certainly Democrats — gives them something of a wedge issue.
Gonzalez, speaking for herself and the sponsoring unions, says she’s open to fine-tuning the measure. She’s introduced one measure herself to clear up exemptions for estheticians, electrologists, manicurists, barbers and cosmetologists.
However, Gonzalez also refuses to make any fundamental changes in AB 5 and has the backing of her party, powerful unions and, indirectly, the Supreme Court. Were AB 5 to be repealed, the court’s ruling would stand and that could mean job-by-job legal battles over employment status.
Gonzalez is trying to dampen the criticism by proposing tax breaks and direct assistance to freelancers to help them incorporate as businesses or otherwise cope with AB 5’s effects.
“We know many of California’s independent contractors who operate as actual small businesses are making a good faith effort to comply with AB 5 and formalize themselves and their business licenses,” Gonzalez said in a statement. “This one-time relief will help these business owners with the transition to becoming LLCs (limited liability corporations).”
How AB 5 ultimately plays out is unclear. One ironic scenario could be that the Uber, et al, initiative would pass, thus exempting the unions’ original targets, but the measure’s provisions would still apply to everyone else.