In California, a Landmark Labor Law’s Turbulent Rollout

In this Aug. 28, 2019, file photo, Assemblywoman Lorena Gonzalez, D-San Diego, speaks at rally calling for passage of her measure to limit when companies can label workers as independent contractors at the Capitol in Sacramento, Calif.

In this Aug. 28, 2019, file photo, Assemblywoman Lorena Gonzalez, D-San Diego, speaks at rally calling for passage of her measure to limit when companies can label workers as independent contractors at the Capitol in Sacramento, Calif. AP Photo/Rich Pedroncelli, File

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The enactment of the new “gig worker” guidelines has been celebrated by some and assailed by others, and may offer lessons for states pursuing similar policies.

Giant tech companies like Uber and Lyft have long complained about California’s new “gig worker” law. But as the tightened labor regulations went into effect this month, some of the freelancers the rules are intended to help raised objections, saying their careers and earnings are being upended by the restrictions on contract work. 

The law has been hailed as a landmark measure. It sets criteria for determining when employers must classify workers as full-fledged employees as opposed to independent contractors. But it also includes exemptions to those rules for a range of professions—doctors, lawyers, accountants, engineers and fine artists to name a few.

Independent contractors who work in some of the fields that aren’t exempted, like translators, therapists, journalists and truckers, are now fighting to get carve outs of their own, either by lobbying for amendments to the law, or by challenging the statute in court.

Proponents of the California law—often referred to by its bill number, AB 5—say it’s a major win for workers, one that paves the way for many to gain new protections in the workplace around wage standards, benefits and having a chance to form and join unions.

For lawmakers in other states considering similar measures, the law’s rollout could highlight how decisions about exemptions are apt to be controversial with any legislation that applies new rules to a wide range of jobs. Essentially, the broader the bill, the more likely it is to draw criticism from workers in at least some professions.

New York, New Jersey and Illinois are among the other states where officials have shown an interest in enacting legislation along the lines of AB 5.

“The one big lesson might be, for legislators in other states, maybe to pick their shots more carefully, to single out industries which are in need of coverage,” said William Gould, an emeritus law professor at Stanford and former chairman of the National Labor Relations Board. 

Gould said California lawmakers had limited leeway to craft a narrower bill because of how AB 5 emerged out of a state Supreme Court ruling. That ruling outlined a legal test for determining when workers can be classified as contractors and is now codified in the law.

“I think the legislature was responsible in devising exemptions,” he said. “The question is whether they hit the sweet spot or not. That’s a difficult judgment.”

Pushback From Some Professions

In David Higbee’s view, lawmakers did not hit the sweet spot. Higbee is an independent translator and interpreter in southern California, specializing in Japanese and Spanish. He’s been working in the profession for about 18 years.

“It's just such a mess,” he said. Higbee said last week that he’d already heard from four or five translation and interpretation agencies that say they are no longer willing to hire him because of AB 5. “I’m sorry, but we can no longer use you because you live in the state of California,” he said, describing what they told him.

In addition to working as a freelancer, Higbee also runs a small business with his wife, where they farm out work he can’t handle to other translators and interpreters. As an employer, he also finds the law difficult to navigate. 

Higbee estimated that he hires other contractors for about 30 projects each year. The jobs may only last a few hours and usually require different combinations of language skills and specialities, meaning that he typically doesn’t bring on the same people on a regular basis.

“We cannot hire an interpreter or translator as a part-time employee for three pages of a Vietnamese birth certificate that comes through the doors once a year,” he said.

Higbee said he worked previously for an automaker as an in-house interpreter and translator, but struggled in those two years to make ends meet with the pay. For part of the time, he said he lived out of his car and couldn’t afford to move his wife and kids to where the job was located.

These days, Higbee said he is comfortably supporting his family. “They cannot tell me that being an employee is going to be a better life than being an independent contractor. That’s an absolute lie,” he said. If AB 5 stays as is, Higbee said he’ll probably move out of California. 

People in other fields have raised similar concerns.

Randy Dotinga is a freelance journalist based in San Diego and former president of the American Society of Journalists and Authors. He said that he’s not had any clients cut ties with him yet, but reports other freelancers are being “blacklisted” by media companies over AB 5. 

“We know of hundreds of freelancers who have lost work,” said Dotinga.

The law limits independent journalists and news photographers to submitting 35 items a year to an individual publisher. Beyond that, an employer is supposed to hire them as an employee. 

Freelance journalists have filed a lawsuit, alleging these restrictions are an unconstitutional infringement on the right to free speech and a free press.

Jim Manley, a lawyer with the Pacific Legal Foundation, who is representing journalists in that case, criticized AB 5 for being “Swiss cheese with exemptions.”

“Marketers have a complete exemption. So you can write as many press releases as you want as an independent contractor, as a freelance marketing professional,” he said. “But if you write a news story about those press releases, you’re limited to 35 submissions.”

“When the government’s making distinctions about what rules apply to you based on what you’re saying, the First Amendment takes a very skeptical view of that,” Manley added.

Not everyone is convinced the journalists have a strong case. Catherine Fisk, a professor who focuses on labor law at Berkeley, said their lawsuit makes a “crazy argument” with its First Amendment claims. “There’s all sorts of regulation of media companies or writers,” she noted.

“Owner operator” truckers, who own their rigs but get jobs through trucking companies and brokers, have also opposed AB 5. A lawsuit they’ve filed claims that the law should not apply to them because it is preempted by a federal statute that limits state regulations on trucking. They've also argued that the law violates the U.S. Constitution’s Commerce Clause.

A judge overseeing that case has granted a temporary restraining order that has halted enforcement of AB 5 as it applies to the truckers, at least until further legal proceedings play out.

‘Denied Basic Protections’

AB 5 supporters argue that the law is sorely needed. They say that entire business models in the tech sector have been built on exploiting workers who are wrongly classified as contractors, and that in other industries problems with worker misclassification have festered for years. 

“This is not a new issue,” said Fisk, the Berkeley professor. “What’s happened is, companies have become especially aggressive about using the independent contractor category.”

“The more states or localities regulate working conditions to try to raise the standard of living, or to eliminate threats to public safety,” she added, “the more likely we will see companies trying to exempt themselves from this legal regulation by saying that all of their workforce is contractors.”

If workers are reclassified as employees under AB 5, they stand to gain basic workplace protections like the minimum wage, overtime pay, unemployment insurance and workers’ compensation insurance, which covers employees injured on the job. 

For employers, especially those that now rely heavily on contractors, payroll taxes and other costs tied to these sorts of changes could cause labor expenses to rise substantially.

During an interview this week with Yahoo Finance, California state Assemblywoman Lorena Gonzalez, the San Diego Democrat who authored AB 5, said that the “vast majority” of people who would be affected by the law work in fields like construction, retail, salons or janitorial services. 

“They're being denied basic protections,” she said, “just because of being called an independent contractor.”

Edan Alva has been a Lyft driver for about five years now. He started off picking up passengers using the Lyft app on his commute when he had another job. It was a way to make some extra money and to carpool. But after losing his job, he turned to driving as a main source of income.

His perspective is that Uber and Lyft have treated drivers unfairly for years, and that AB 5 will help to solve this problem. “We want, honestly, the exact same protections that exist by law for any other workplace,” said Alva, who is involved with the advocacy group, Gig Workers Rising.

“This is a situation where the relationship between the company and the workers is that of an employer and employee,” he added.

Alva said it’s difficult to afford health insurance or to save for retirement working with Lyft and that it’s tough for full-time drivers to earn a livable wage after paying expenses like gas and vehicle upkeep. But when asked why he does the job if it has so many shortcomings, he bristled.

That’s a question, he said, “that shows entitlement.” There are all kinds of reasons someone might drive for Uber or Lyft, Alva added. “Some people simply don’t have other choices.”

Alva went on to say he doesn’t think the actual work of ferrying around passengers is that bad. “I enjoy providing service, I enjoy talking to my passengers,” he said. His beef is that companies worth billions of dollars have foisted so many risks—vehicle damage, crashes, personal well being—onto drivers with so few workplace protections, who are sometimes just scraping by. 

Ultimately, Alva said that he believes unionizing will be crucial for drivers to improve the conditions that they are working under. “Without an actual union, we cannot enforce anything," he said.

Brian Dolber is an organizer in Los Angeles with the group Rideshare Drivers United, which is advocating for the unionization of app-based ride-booking drivers. 

He pointed out that Uber has already begun to make changes to how it treats drivers as AB 5 has gone into effect. An example, he said, is the reinstatement of a “surge multiplier” pricing program at high-traffic times. Drivers were fighting to get it brought back, because it can help them earn more money. “We see that as a huge victory,” Dolber said. 

“What this shows us, and what this shows drivers, is that organizing actually works,” he added.

Dolber predicts that ride-booking companies will continue to give drivers "pieces of what we’re asking for, up until we say we want to be treated like a union. That’s the one thing that they’re going to be completely unwilling to give up and it’s why they’re so scared of AB 5.”

Tech Sector Backlash

Various big tech companies that depend on contract labor have more or less declared war on AB 5, throwing their weight behind a lawsuit and a big-dollar ballot measure campaign.

Last month, Uber, along with Postmates, a company that offers a delivery service app, and two workers who use the companies’ platforms, sued over the law in federal court. 

They allege that AB 5 is unconstitutional for a number of reasons. “Rather than embrace how the on-demand economy has empowered workers, benefited consumers, and fueled economic growth, some California legislators have irrationally attacked it,” the lawsuit says.

The court complaint emphasizes that neither Uber or Postmates believes it actually “hires drivers or delivery persons,” and that the only service they provide “is access to an app.”

Gould, the Stanford law professor, described the lawsuit as “a hodgepodge” of arguments, “for the most part made up of considerable huffing and puffing.”

As that case plays out, Uber, Lyft, Postmates and two other tech companies are also preparing to fight AB 5 at the ballot box. They’ve together pledged a combined $110 million in support of a ballot measure for November 2020 that is aimed at getting their businesses an exemption from the law.

The measure would also impose some guidelines for how these sorts of companies treat drivers and other workers using their apps.

It calls for paying workers at least 120% of the minimum wage, plus 30 cents per mile from the time a driver accepts a ride, or agrees to carry a package, until they drop off. There would also be a health care stipend, as well as certain liability and accident insurance coverage.

The proposal amounts to an attempt by the companies to strike a sort of middle ground between the status quo and where things could end up under AB 5. To qualify for the ballot, the measure’s backers will need to gather about 625,000 signatures in support of it by June 30. 

For people like Alva, the Lyft driver, the ballot measure falls short. He waves it off as a “weak alternative” to AB 5 and an attempt by companies to minimize their costs as pressure grows for stronger worker protections. 

But other workers see things differently. 

“We have 27,000 drivers so far signed up in support,” said Stacey Wells, a spokesperson for Protect App-Based Drivers and Services, a campaign for the measure.

Part of the tech companies’ narrative around AB 5 is that if they are forced to adhere to the law, then workers like drivers and couriers who use their apps will lose much of the flexibility they now enjoy and will have to transition to more of a shift-worker model of employment.

Critics say that this is a scare tactic and experts point out that there is no specific provision in AB 5 that would require, say, Lyft or Uber, to become more strict with scheduling. But Wells said that there are practical issues that need to be taken into consideration.

Tens of thousands of people now drive for app-based services in California each year, many for more than one. Lyft notes that 90% of the drivers using its app drive less than 20 hours a week.

The idea that all of these people could be hired as employees, paid for downtime while they’re not carrying passengers, and switch between competing services throughout the course of a day—and that this would all mesh with customer demand—is just not realistic, Wells said.

"What AB 5 tries to do is force these companies to make every Californian who wants to drive an employee by just turning on an app,” she said. “That's a fantasy world. In that kind of utopian vision, that would mean that anybody can just turn on an app, kick back, get paid any time, potentially get health benefits, vacation and sick leave.” 

Benjamin Miller, who has worked over two years in the Los Angeles area as a Postmates courier, is supportive of the industry-backed ballot measure. Miller said he crams in 12 or 15 hours of work some days, freeing him up on other days to spend time with his kids.

He said he’s not interested in joining a union. Miller explained that he belonged to one at a past job and didn’t find it helpful. “It's all about the money with them,” he said. “You gotta pay union dues. Then when you need them, they give you the runaround.”

In general, Miller said he’s content with the work he does, although he wouldn’t mind a little higher pay. But anything that's a threat to flexibility, he said, is not good. That’s a big part of what worries him about AB 5. “With AB 5,” he said, “there’s just too much in the air.”

Bill Lucia is a senior reporter for Route Fifty and is based in Olympia, Washington. You can reach him at wlucia@routefifty.com.

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