On Jan. 1, 2020, California’s Assembly Bill 5 went into effect. AB 5 is a bill that sharply regulates how companies can work with contractors and freelancers — so-called gig economy workers. Its results were sudden and far-reaching, and the current United States Congress and the Biden administration are looking to emulate its example in the PRO Act that Democrats are including in President Joe Biden’s $2 trillion infrastructure plan.
It could create difficulties for many of their constituencies. The liberal internet company Vox Media had run articles in its flagship publication Vox supporting AB 5, with titles such as “‘Gig workers’ win in California is a victory for workers everywhere.” Yet, the company laid off about 200 California gig workers for its SB Nation sports website in December in response to the bill’s limit on the number of freelance contributions per gig worker just before the law kicked in.
Journalists were far from the only California gig workers to lose work over AB 5. Freelancers Against AB 5 is a Facebook group with almost 20,000 members. The group has compiled a bill of complaints against the law’s restrictions on their ability to earn income. It’s a long list with particular grievances, ordered alphabetically by profession.
To take the letter A, affected professions include auctioneers, actors, adjunct faculty, after-school programs, animal shelter consultants, 3D animators, architectural designers, architectural rendering illustrators, art therapists, audiovisual techs, and authors.
The adjunct faculty complaint comes from Katharine West, who wrote: “Throughout the state, all adjunct faculty must now be paid as hourly part-time employees rather than the previous flat-rate contract employee for each course taught. Hourly wages for adjuncts today are terribly, unbelievably, demoralizingly low. The last time I earned this hourly wage was as a new nurse in 1978.”
Architectural rendering illustrator Kevin Matty complained that he had lost “over 50%” of his previous income because his “clients that I’ve had for years don’t want to give me too much work because they’d have to hire me as an employee and cannot afford it.”
Animal shelter consultant Valerie Talcott Fausone wrote, “At a time when Governor [Gavin] Newsom made the brave and correct call to create a No Kill California, I was all set to consult on this, given I have seven years of safe, no-kill public sheltering experience. Now, I cannot consult with shelters looking to improve their results.” Instead, Fausone is moving to Texas, where she can consult with shelters without triggering employment requirements.
Kevin Kiley is a member of the California State Assembly from the 6th District, near Sacramento, which includes Lincoln and Roseville. He’s a Republican but doesn’t believe AB 5 should be a particularly partisan issue. While directing the Washington Examiner to the Freelancers Against AB 5 group, he emphasized that many people whose livelihoods were affected were and are Democrats.
Kiley wants to repeal AB 5 in the California State Assembly or, failing that, by a direct vote of the people. “I, in fact, have a ballot initiative committee to do just that,” he said.
Many companies across the country, Kiley complained, “do not hire [contractors] from California because of AB 5,” and the laws made things worse for people during the recent COVID-19 lockdowns when the ability to do piecework from home might have come in handy for many people. He thinks the legislation is tremendously unpopular and points to two pieces of evidence, beyond polling, to prove his case.
First, legislators in Sacramento have already passed a nontrivial number of exemptions for industries hit hardest by the legislation. “It’s like 120 or something exemptions at this point,” Kiley said. Second, California’s voters last November took a huge bite out of the legislation’s reach with Proposition 22. That initiative allowed Uber, Lyft, and other delivery drivers to remain contract gig workers. It passed with over 58% of the vote.
Of AB 5’s outright repeal, Kiley said, “So far, the Legislature has not been receptive to that.” This is puzzling until we look at the organization currently suing in California courts to stop Proposition 22 from taking effect: the Service Employees International Union.
The SEIU explained the lawsuit in a statement by charging, “Prop 22 unconstitutionally limits the power of elected officials to govern, including by stripping the legislature’s ability to grant workers the right to organize for improvements to our pay and working conditions. It also illegally excludes workers from the state workers’ compensation program. The suit also asserts Prop 22 violates a provision in the State Constitution requiring ballot initiatives address only a single subject.”
AB 5 passed in the first place and is under consideration at the national level because several unions that have serious pull with the Democratic Party wanted it. Gig workers are a tricky problem for unions. These workers are not employees and cannot organize into the company-sized bargaining units that are the basis for most unionization labor laws.
Many drivers for Uber or Lyft, to take the most prominent example, drive for both companies. They freely switch from one ride-sharing service to the other, depending on the availability of work and the rates offered. Moreover, when rides are down, as they have been during the coronavirus pandemic, many of those drivers might use slow periods to deliver food for DoorDash or become personal shoppers-deliverers for Instacart.
AB 5’s solution to this problem is to force many gig workers into the employee box. It does this by sharply limiting the amount of gig work a freelancer can do before a company must hire that freelancer as an employee or face penalties. This approach has made some gig workers into employees who can, in theory, be organized. It has also caused many more to lose their gigs and lose substantial income. For instance, when Vox Media let the earlier mentioned 200 California freelancers go, the company hired 20 writers in a mix of full-time and part-time roles to take their place.
Many liberals want to take this approach and apply it to the whole nation. The most prominent Vox article celebrating AB 5’s victory in September 2019 concluded, “There’s even a congressional version that mimics AB 5, called the Workplace Democracy Act, introduced by Sen. Bernie Sanders. The bill would require all employers to use the same strict standard that California uses to determine if someone is an employee or an independent contractor. Now that California has its win, it may only be a matter of time until workers across the country have theirs too.”
On March 9, the Protect the Right to Organize Act passed the U.S. House of Representatives by a vote of 225 to 206. There were a few strays. Five Republicans voted for it, and one Democrat voted against it. But it was effectively a party-line vote for a bill that is very high on organized labor’s agenda.
The PRO Act, which has yet to pass in the Senate and move to Biden’s desk, would do several things. One of them, critics charge, is to replicate AB 5 at the national level.
“The PRO Act is mainly about making it much harder for employers to resist or avoid unionization of their workers,” Adrian Moore, the vice president of the Reason Foundation in Los Angeles, told the Washington Examiner. “But it includes language … very similar to California’s AB 5 language.”
Steven Greenhut, the western region director of the R Street Institute, is also based out of California. “During the campaign, Joe Biden had promised to pass legislation similar to California’s Assembly Bill 5, which largely banned companies from using contractor workers. He did so despite the evidence of the legislation’s disastrous effects. Instead of creating new permanent positions with benefits, companies shed freelance jobs,” Greenhut said. “I see the legislation as an effort to impose California’s pro-union edicts on the nation. That inflexible labor approach stifles the gig economy and is one reason California has the nation’s highest poverty rate.”
Kiley doesn’t think the PRO Act would be quite as punitive as his state’s legislation. But he said that “the ABC test is a replica of the one found in AB 5.”
The Washington Examiner reached out to the Economic Policy Institute, based in Washington, D.C., which is broadly sympathetic to organized labor aims. An EPI messaging document defends the PRO Act and discusses the language that has critics worried.
“The PRO Act would stop employers from misclassifying employees as independent contractors or freelancers in order to prevent workers from banding together or forming unions to negotiate for better pay and working conditions. The Act would use a legal test, known as an ‘ABC’ test, of three key criteria employers have to meet in order to prove a worker is truly an independent contractor,” wrote Eve Tahmincioglu, EPI’s director of communications.
“The criteria include: ‘(A) the individual is free from control and direction in connection with the performance of the service, both under the contract for the performance of service and in fact; (B) the service is performed outside the usual course of the business of the employer; and (C) the individual is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as that involved in the service performed.'”
Under the ABC test, if a business hired a plumber to fix a busted office sink, it would not have to add him to payroll. But if it contracted with someone to clean the front windows once a week and occasionally said, “You missed a spot,” it’s hard to say. Legal would advise against it.
But how likely is this law to pass? None of the experts the Washington Examiner consulted about technical aspects of the legislation would hazard a guess. Neither would several political scientists. This is odd because Democrats have a majority in the House, have already passed it there, and have a working majority in the Senate with Vice President Kamala Harris’s tiebreaking vote. Why isn’t this legislation a sure thing?
One hang-up is the Senate’s legislative filibuster, which requires 60 votes to end debate and pass a bill. The PRO Act is something Republicans will filibuster when it comes to that. If Democrats aren’t willing to end the legislative filibuster to pass it, the other option is to add the bill into legislation that can’t be filibustered, such as a budget bill. The problem is that there are clear-enough rules about what can go into a budget bill. Items that aren’t easily classified as budget items are supposed to get stripped out.
When House Democrats tried to include a hike in the federal minimum wage to $15 in the recent COVID-19 relief bill, appointed Senate parliamentarian Elizabeth MacDonough ruled that it wasn’t budget-related and stripped it from the bill. Left-wing Rep. Alexandria Ocasio-Cortez, who supports the minimum wage hike and the PRO Act, took to Twitter to order her fellow Democrats to “override the parliamentarian and raise the wage.” However, in that case, senators respected that budgets need to consist of actual budget items. They passed the bill without the minimum wage hike, which happens to be relatively high on organized labor’s list of demands.
If supporters in Congress find a way to pass the PRO Act, Moore predicts that we will see a lot of lobbying by industries to carve out exceptions to the new rule.
“Like in California, this is a bone thrown to the unions that disregards the vast array of work in which employees and employers both want the relationship not to be employer-employee and the many where it is simply not viable. So it will run into the same problems California has where the Legislature has had to retroactively exempt dozens of industries from the restrictions,” Moore said.
Moore used the success of Proposition 22 to further foresee that “reality has come home to roost in California, and it will for this federal legislation as well.”
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