Amidst Economic Crisis, California Creates Exemptions to Assembly Bill 5 Rather Than Repealing It
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Amidst Economic Crisis, California Creates Exemptions to Assembly Bill 5 Rather Than Repealing It

The negative impacts of the law requiring companies to reclassify most independent contractors as employees are being amplified by the coronavirus pandemic.

Members of the California state legislature got plenty of warnings about the likely negative unintended impacts of Assembly Bill 5, which required companies to reclassify most independent contractors as employees. The law was hurting workers and businesses before the outbreak of COVID-19 and now its negative impacts are being amplified by the pandemic. As unemployment skyrockets and the economic downturn worsens, California should repeal the law.

Assembly Bill 5 (AB5), commonly referred to as the “gig worker bill,” originated in response to the California Supreme Court’s ruling in Dynamex Operations West, Inc. v. Superior Court. The ruling established a three-pronged test to determine if a worker is an employee or an independent contractor in wage-order claims. All three components of the test can be difficult to satisfy but saying a worker must perform work that is outside the usual course of the hiring entity’s business is most problematic.

For example, a clothing store could hire a plumber as an independent contractor to fix a leaky pipe but could not consider a seamstress making alterations to its products as an independent contractor––even if the seamstress worked from home and provided her services to other stores.

While AB5 included exceptions for some professional occupations like doctors, lawyers, and insurance brokers, a wide range of lower- and middle-income workers––from musicians to make-up artists—–are being adversely affected now.

AB5 also included a limited exemption for journalists, allowing up them to write up to 35 articles annually for an outlet before being considered an employee. Vox Media provides one particularly ironic example of the bills unintended consequences. Shortly after the bill’s passage, Vox published an article with a headline proclaiming that “Gig workers’ win in California is a victory for workers everywhere.” But, contrary to the alleged victory, the Associated Press reported, “Even before the law took effect, SB Nation, owned by Vox Media, announced that it was ending its use of more than 200 California freelancers.”

California Assemblywoman Lorena Gonzalez, who pushed AB5, is now working on a deal to exempt musicians, singers, musical engineers, sound mixers, and others from the law.  Gonzalez said they’re giving the music industry flexibility “while protecting the right for musicians to have basic employment protections just like every other worker.”

What about workers in every other industry who are being hurt by the law?

The Los Angeles Times reported that as of Feb. 28, well before the state’s COVID-19 shutdowns and economic collapse, there had already been 35 bills introduced in the state legislature to make changes to AB5 — mostly to exempt various groups of workers from it.

If a law needs that many exemptions, it should just be repealed.

In part, AB5 was designed to crack down on ridesharing services like Lyft and Uber and food delivery businesses like Grub Hub. Amid the pandemic, those food delivery businesses are providing a vital service to Californians, playing a key role in keeping restaurants afloat as many states, including California, shut down dine-in restaurant service.

AB5 isn’t just about the gig economy. It is limiting job opportunities for workers who have been laid off as a result of the pandemic and government-mandated stay-at-home orders. More than three million Californians have filed new weekly unemployment claims in the past six weeks and Gov. Newsom said the state has paid out almost $4 billion in unemployment benefits since mid-March.

AB5 was already bad policy, but its ramifications are all the worse in light of COVID-19 and the economic downturn. California should be making it easier for businesses and workers to adapt to our current economic and societal circumstances by doing away with regulations that are hampering our response to the public health crisis and economic recovery. Repealing Assembly Bill 5 is the perfect place to start.

A version of this column previously appeared int he Orange County Register. 

Vittorio Nastasi

Vittorio Nastasi is a policy analyst at Reason Foundation where he works on Florida policy issues including education reform and water quality management.