Codifying the ABC test of AB 5 in the PRO Act will increase nationwide unemployment at the worst possible time.
By Stephany Wilkes, Special to CalMatters
Stephany Wilkes is a writer, sheep shearer and author of “Raw Material: Working Wool in the West”, email@example.com.
I am a California resident, happy beyond measure to work as a writer and sheep shearer. I own West By Midwest, a registered business in San Francisco. I file taxes as a sole proprietor using a federal Employer Identification Number. I receive 1099s – not W2s – from my clients. I am neither an Uber driver nor an abused worker in any way.
That has not spared me the harm of the ABC test in California’s AB 5, legislation ostensibly created to regulate Uber, Lyft and other app-based companies. The ABC test says a worker is an employee unless we:
1. Are free from the control and direction of a hiring entity in connection with the work we perform; and
2. Perform work that is outside the usual course of a hiring entity’s business; and
3. Engaged in “an independently established trade, occupation or business of the same nature as the work performed.”
Unfortunately, this ABC test is included in the PRO Act – Protecting the Right to Organize Act – federal legislation that passed in the House last week. If it succeeds in the Senate as-is, the PRO Act will codify the ABC test nationwide and make independent contractors employees covered by the National Labor Relations Act.
What’s the problem? To the first point of the ABC test, any client might reasonably exert some control and direction in the work I do, for which they pay me. To the second point, clients often need contractors to help with the usual course of business, not just the unusual.
But there is perhaps no greater proof of the harm the ABC test creates than the fact that California has exempted at least 107 professions from it altogether, some in AB 5 itself and more in AB 2257’s amendments.
Notably, AB 2257 took effect immediately, in September 2020. It could not wait for Jan. 1, 2021, because it had hurt so many workers, from freelance writers to nurses, from foresters to court translators helping to reunite children separated at the border with their families. Unfortunately, many California workers – including licensed mental health professionals – remain subject to the ABC test.
Today, thanks to California’s Prop. 22, AB 5 does not even apply to Uber and Lyft, and the ABC test does not apply to the 107 professions who either had lobbyists to represent them in Sacramento or, like writers through California Freelance Writers United, were able to make enough noise to gain exemptions in AB 2257. This means AB 5 unfairly, and somewhat arbitrarily, applies to independent contractors.
Worker misclassification and abuse is a real problem, and there are many ways to address it. The IRS rules, for example, are clear. They assume workers are employees unless proven otherwise, and define independent contractors as having multiple clients, and doing work on our own schedule, at our own place of business, with our own tools. It’s a simple definition that has clarified freelancing for decades in tax filings and suits modern work better than the ABC test.
Striking out on my own ended 20 years of sexism and pay discrimination I experienced in the workplace, which is one reason why the Hispanic Chamber of Commerce and NAACP fought AB 5 in California.
More importantly, independent contracting gave me the ability to spend three years as my grandmother’s caregiver. She suffered from vascular dementia, and no W2 employer could have reasonably been expected to deal with my spending multiple weekdays at doctors’ appointments or managing spirals of confusion and anxiety that often lasted from 7 a.m. to 2 p.m. Throughout all of this, I was able to work odd hours and avoid unemployment.
Codifying the ABC test in the federal PRO Act will increase nationwide unemployment at the worst possible time. The IRS rules are a win-win, a modern, robust replacement that can address worker misclassification without creating harm to independent contractors.