It might be the most controversial state law since Proposition 13 more than 40 years ago.
It is Assembly Bill 5, and just about anyone who works in the so-called gig economy knows about it.
AB 5 became the law on January 1st. It codifies a state Supreme Court case that basically held most independent contractors should be classified as employees and, therefore, are entitled to labor protections such as minimum wages, sick leave, unemployment and workers compensation benefits, none of which independent contractors are entitled to. It also means companies are responsible for providing those benefits and paying the costs associated with those benefits.
Assemblywoman Christy Smith (D-Santa Clarita) voted for it; Sen. Scott Wilk (R-Santa Clarita) voted against it.
The law provides a three-part test for companies to determine if a person should be classified as an independent contractor: the person is free from control and direction of the company in connection with the work, the person does work that is outside the company’s usual work; and the person is engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed.
Numerous industries and occupations are exempt: licensed insurance agents, certain licensed health care professionals, registered securities broker-dealers or investment advisers, direct-sales salespersons, real estate licensees, commercial fishermen, workers providing licensed barber or cosmetology services.
Two groups that are not covered are rideshare drivers and freelance journalists, although the law allows journalists to make 35 submissions a year; for a weekly paper such as the Gazette, all submissions in any one issue count once toward the 35. Additionally, newspaper distributors are exempt until next January 1st.
Numerous lawsuits have been filed right before the law went into effect. One filed by the California Truckers Association, were successful. A federal judge granted a restraining order December 31st.
The American Society of Journalists and Authors and the National Press Photographers Association also field suit, with the website Law360 reporting that the state urged the suit to be dismissed because the law doesn’t unfairly restrict freelance journalists.
Regardless, Sen. Patricia Bates (R-Laguna Niguel) has introduced two bills to help the newspaper industry, each of which Wilk is one of nine co-authors. SB 868 would exempt freelance journalists, and SB 867 would make the distribution exemption permanent.
Gazette Publisher Doug Sutton said AB 5 affects four journalists who work for his paper, but without the exemption for distributors, it would be too costly to continue producing.
“I am committed to finding a way for Californians to continue working in the way that works for them. Last year the Governor and majority party left many industries and professions scrambling to survive when Assembly Bill 5 was passed and signed into law – including newspapers and freelance journalists,” Wilk said in a statement. “Today, we are taking a first step in fixing the new law’s many flaws by helping California’s newspapers and journalists continue in their traditional way of doing business.”
There may be more bills coming to modify AB 5. Smith said in a statement she is part of a working group to address fixes to the law, and that work is ongoing. She told the Gazette last fall she would be amenable to modifying AB 5.
But at least one industry isn’t waiting to see what the Legislature does, and it’s the industry most targeted by AB 5: ridesharing, primarily represented by Uber, Lyft, Postmates and DoorDash.
These organizations have reacted in many ways. They filed a lawsuit, submitted a ballot proposition, ignored the law and quietly changed the app for California drivers.
Postmates and Uber filed in district court on December 31st, claiming AB 5 is unconstitutional. Unlike the truckers, the rideshare companies have not won. The San Francisco Chronicle reported the judge declined to grant the injunction but didn’t dismiss the suit and will take more time to consider the objections.
Meanwhile, Uber came up with “Project Luigi,” which the Washington Post called a companywide initiative to change the app in this state to help build its court case that its drivers are free and independent. These include removing set prices for trips and replacing them with ranges based on distance and estimated time. Drivers can decline these without penalty.
Uber, Lyft and DoorDash are spending $30 million each to get a ballot proposition on the November ballot that would exempt them from AB 5.
Amid all this, the companies also seem to be ignoring the law. Gary Emerson, who drives for Uber and occasionally takes rides into Santa Clarita, said he has received no communications from Uber about AB 5.
NPR reported that gig companies are simply refusing to reclassify their workers. Instead, Uber, Lyft and other gig companies are negotiating with lawmakers and labor unions to create a new class of worker: a contractor with some added benefits.
Some of these benefits appear in the ballot proposition: minimum compensation levels, insurance to cover on-the-job injuries, automobile accident insurance, healthcare subsidies for qualifying drivers, protection against harassment and discrimination, and mandatory contractual rights and appeal processes.
One thing’s for sure: This law’s final form hasn’t been set.