Bill to Protect Independent Contractors Advances in California

SACRAMENTO, Calif. (CN) – California lawmakers approved a sweeping employment law bill Wednesday that would force a variety of industries – including the gig economy and trucking companies – to provide benefits to independent contractors.

Assemblywoman Lorena Gonzalez pitched her bill to a state Senate committee as a boon for workers’ rights and a major step toward halting income inequity in the Golden State.

“The state can’t sit by while companies pass off their own costs of doing business onto taxpayers and responsible businesses, while depriving millions of workers of the labor law protections they are so rightly entitled to,” said Gonzalez, D-San Diego.

After more than two hours of debate, the Senate Labor Committee cleared Gonzalez’s union-backed measure, Assembly Bill 5.

Gonzalez and a variety of unions want to codify a landmark 2018 California Supreme Court decision that reverberated throughout boardrooms of businesses and sparked debate over who does and doesn’t deserve employment benefits.

In Dynamex v. Superior Court, the state’s high court ruled that in order to classify workers as contractors, a company must show it does not directly control the worker, the work falls outside its usual course of business, and the worker is “customarily engaged in an independently established trade.” The three prongs have been referred to as the “ABC test,” and is the standard Gonzalez wants to cement with AB 5.

Independent contractors are no doubt a staple of California’s massive economy: According to a study cited in the bill’s analysis, the number of independent workers jumped 30% from 2005 to 2015. In addition to ride-hail drivers, truck drivers, freelance writers, software developers and musicians often work on independent contracts.

Yet the 16-page analysis states that even if AB 5 becomes law, it’s far from a “Northwest Passage” fit to guide all employment classification disputes.

“Therefore, AB 5 faces a herculean task: cutting through 30 years of deferred statutory leadership, codifying a case that is concrete only in the abstract, and identifying and addressing the areas where the Dynamex test inappropriately fades in the margins,” the analysis states.

Since introducing it last December, Gonzalez has amended the bill to exempt professions such as insurance brokers, licensed doctors, financial advisers, salespeople, cosmetologists, lawyers and other professional services.

Notably absent from the list are ride-hail drivers.

Uber and Lyft’s CEOs are holding out hope that Gonzalez will add ride-hail employees to her growing list of exemptions.

They said in an op-ed last month that classifying drivers as employees would ruin the flexibility that allows drivers to work whenever they want. The companies claimed to be open to offering drivers vacation time and other benefits if they are allowed to continue classifying drivers as contractors.

But the promises haven’t swayed Gonzalez, who chairs the powerful Assembly Appropriations Committee, or the labor unions behind AB 5.

“They can sit here and say they care about workers and they would love to provide benefits. They could have provided [workers] with a lot more money, that we know,” Gonzalez said Wednesday of Uber and Lyft’s pitch. “They won’t unless we force them to.”

Dozens of Uber and Lyft drivers from across the state testified in support of AB 5, including Steve Gray of San Francisco. Gray, member of Gig Workers Rising, hopes AB 5 will allow ride-hail drivers to eventually unionize.

“We need you guys,” Gray told the five-member committee.

The lone member to vote against the measure, Republican Mike Morrell of Rancho Cucamonga, accused Gonzalez of picking favorites with her exemption list. The former business owner believes AB 5 could inadvertently discourage entrepreneurship and start-ups.

“I think it’s going to be a blow to our economy, I don’t know how new businesses are going to get started,” said Morrell.

Gonzalez explained the selected exempted professions typically have strong bargaining power or make more than double the state minimum wage. She added she’s spent more time on AB 5 than any of her other bills and that she’s going to continue talking with business groups about additional carve outs.

With Wednesday’s result, AB 5 advances to the Senate Appropriations Committee ahead of a potential floor vote.  The Assembly passed the bill 55-11 in May.

The score of different industries petitioning for exemptions shows that despite the bill’s passage, it’s far from fully baked. Travel agents, musicians, court interpreters and other on-demand workers told the committee they would support AB 5 if their professions were added to the exemption list.

The California Chamber of Commerce wants amendments to address the issue of retroactivity of Dynamex and for more professional services to be exempted.

“Businesses are being held liable for not following the ABC standard that never came up or never existed,” said Jennifer Barrera, the chamber’s executive vice president.

In a nod to Barrera’s point, committee staff also advised lawmakers to limit retroactive penalties.

“We also need to ensure that blameless parties are not swept up in the push for justice,” the bill analysis states.

State Sen. Hannah-Beth Jackson commended Gonzalez for taking on the monumental task of trying to incorporate the controversial Dynamex into California labor law.

“This is really sort of an existential moment for the 21^st century, and I really hope that we can come up with something meaningful for everybody,” said Jackson, D-Santa Barbara.

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