Gig-Worker Bills and Laws: a Comprehensive Overview

If you own a small business, have a side-hustle, or pay for your medical needs with some freelance work, you are or potentially will be affected by the new gig-economy bills and laws in some states. If the H.R.2474 (the Pro-Act), the federal version of the California law passes the senate and is signed into federal law, you most likely will be impacted no matter where you live. This article will help you navigate these complex bills and laws by providing you with the following: terms, state information, overview, problems created by gig-worker bills and laws, relationship to Super-PACS, guidance on obtaining unbiased information, resources, hashtags, and the partisan politics of AB5

Please note that much of the state-specific information will be based on California’s AB5 bill which became the law in January, 2020. This is for two reasons:

1. We are able to see the fallout which has included lost work, lawsuits initiated by the state of California on business owners, and lawsuits initiated by organizations representing ride-share companies, truckers, InstantCart, and journalists against the state of California. The law is currently in-flux, and there is a proposed fix-it bill with additional carve-outs (exempted professions that meet certain criteria), clarifications, and additions.

2. California’s ABC test is in the Pro-Act text.

Terms
ABC Test: presumes that any worker is an employee unless the hiring company proves that the worker: A. Is free from the control and direction of the company in performing work, B. Performs work that is outside the usual course of the company’s business; and C. Is engaged in an independently established trade, occupation, or business of the same nature as the work performed for the company.

Gavin Newsom, California’s Governor, signed AB 5 into law on Sept. 18, 2019. This codified the ABC test for classifying employees vs. independent contractors. It is the “B” prong of this test that is blocking hiring companies and gig-workers from establishing business relationships, as both parties are generally engaged in the same type of business.

Carve-out: an exempted profession in a bill or law (the exemption can be a full exemption, or partial exemption, and be with or without stipulations. For example, Doctors and Lawyers in California get a full carve-out.

Dynamex: a lawsuit that was decided in superior court by misclassified employees. It set a legal precedent for wage-order violations in 2018. It is this precedent that the author of AB5 used to expand the reach of ABC to over 200 professions.

Employer: a person or entity who employs another and who is responsible for paying the following: Social Security taxes (6.2 percent to a yearly maximum), Medicare taxes (1.45 percent of wages), Federal unemployment taxes, and State unemployment taxes.

Gig-worker (also referred to as a Freelancer, Independent Contractor, or Independent Worker, and perhaps a Small Business Owner): someone who does work for another without being employed by them. The gig-worker pays for their own healthcare and Social Security, and files taxes. He or she receives a 1099 for their work.

H.R.2474 (the Pro-Act): a bill that was passed by the House of Representatives. Its title is misleading: H.R.2474 — Protecting the Right to Organize Act of 2019. This bill contains the ABC test and other gig-worker specific verbiage.

State Information
All states currently have legislation around the hiring company/worker relationship. They either follow the ABC test, use the A & C criteria of the ABC test, or use the Common Law test which is used by the IRS. These tests are not new but some of the states who use the ABC test are creating new bills and laws to try to cope with the gig economy which are problematic. Click here for a complete list of which test each state uses.

CA: AB5. Status: Signed into law. Several bills in the works to amend or repeal it. AB 1850 is the fix-it bill by AB5s author, Lorena Gonzalez-Fletcher. It has some additional clarifications and exemptions but no one is certain when it will be voted on. In addition, there are over 30 other bills to repeal, replace, amend, or suspend AB5 which have been proposed.

NJ: Bill S4204. Introduced.

NY: has two bills on this right now: S6699A in the Senate and A8721 in the Assembly. Both are in committee.

MA: Has a law similar to CA, but is less stringent. Click here for more information.

IL: The bill to increase the minimum wage may be expanded to include gig economy regulations.

Overview
While these bills and laws have been presented as protective to workers, the reality of what they are is something else entirely. They do more than assume one is an employee unless proven otherwise. They presume that every freelance worker is either an employer or an employee. In some situations, this makes sense. For example, a package delivery driver who drives a company truck, wears a company uniform, and delivers packages for the company for 40 hours a week could be classified as an Independent Contractor by the hiring company prior to Dynamex. In other cases, the bill does not make sense, and is arbitrarily punitive or complex, and gets particularly hairy when a group of people in the same field hire each other for different gigs (e.g., musicians, dancers, farm workers, etc.).

The Problems Created by Gig-worker Bills and Laws
Here in California, we’ve been dealing with the fallout of AB5 since last September when it was signed into law and slated to take effect in January, 2020. These problems are not hypothetical. They are why Californians have launched a massive campaign to get this thing repealed:

· Hiring companies have or are pulling out of the state, or are refusing to work with California freelancers.

· Some hiring companies have agreed to continue working with Californians if they are incorporated. This franchise tax, which will be forgiven for one year only, is $800 per year afterwards.

· The state of California has started suing both large and small companies for employee misclassification, levying hefty fines and penalties along with back taxes. There are lawsuits against the state of California as well.

· Some freelancers are unable to work at all due to the stiff penalties levied on them for hiring others, caps on content submissions, these laws being in conflict with SSDI regs., or because they cannot afford to continue with the law being what it is and have to seek other types of work.

· The impact on the Arts (for example, live music) has been devastating, with performances being cancelled, and many artists and arts organizations unable to survive.

· AB5 takes away work choices from people with disabilities, caregivers, working moms, and those over age 50, as well as other groups.

Relationship to Super-PACS
Up until a few months ago, I had never heard the term “Super-PAC”. The “PAC” is an acronym for “Political Action Committee”. A Super-PAC uses its resources to endorse or fight political candidates and is permitted to purchase advertising through various media outlets to reach voters. PACs are made up of special interest groups whose intent is to get the candidate of their choice elected in order to get laws passed in their favor. Big pharma, for example, has come under fire for using its resources to promote its own agenda through Republican candidates. Now, we are seeing unions not only promote politicians (all of whom are Democrats in this instance) but they are actually part of the review process for bills. Yes, they were behind the passing of AB5. The result of their role in crippling the gig-economy in California is that they are effectively eliminating the competition for their members, as well as helping to expand their membership. Caving to special interest groups does not just happen at the local level. Union Super-PACs are using their influence to finance presidential campaigns: https://thehill.com/homenews/campaign/486723-biden-expands-support-among-unions

Guidance on Obtaining Unbiased Information
If you do a general Google search on AB5, you are likely to encounter a slew of articles that are pro-AB5 and which back its author, Lorena Gonzalez-Fletcher. It is important for everyone to dig a little deeper. Know that due to the influx of smaller, internet-based media outlets, the more traditional outlets have taken a hit. They’ve lost subscribers and revenue. Some of them rely on advertising revenue through the Super-PACS, and others are slanted towards a bias on either side. If you want to get at the truth, read articles and blogs both for and against gig-worker laws. Business magazines are good resources (for example, Business Insider). You may also want to join AB5 and Pro-Act Facebook Groups, read statements from professional organizations that represent professions impacted by these bills and laws (like the ASJA). Lastly, Twitter is the battleground between gig-workers and legislators.

Resources

Facebook Groups:

(Note that the following are just a sampling of groups both for California and the US. There are many more for other states impacted by gig-worker laws as well as for other professions with their own groups.)

Fight for Freelancers USA
Freelancers Against AB5
Freelancers against “Pro Act”
Freelancers & Gigging Musicians Fighting AB5
California Ride Share Drivers Against AB5
Healthcare Professionals Against AB5

Articles and Websites
AB5 Articles Archive
AB5 Bill Text
AB5 Facts
AB 5: The Aftermath of California’s Experiment to Eliminate Independent Contractors Offers a Cautionary Tale for Other States
Gutting the Gig Economy
IC Law News
KUSI (AB5)
Pro-Act Bill Text
RepealAB5Now.com
Truth About Lorena

Twitter Hashtags
#AB5, #RepealAB5, #DemocratsAgainstAB5, #FacesofAB5, #AB5Stories

The partisan politics of AB5 in California
In California, AB5 was authored, co-authored, signed into law, and is backed by the vast majority of Democrats. For reasons that we are unclear on (as the sound-bites provided by the bill’s author don’t hold water), Democrats continue to support this situation despite tens of thousands of protests by their constituents. Some Republicans have stepped up to challenge the bill with their own repeal and/or replace bills. Among them, Assemblyman Kevin Kiley has been ethically trying to help those affected by the law. Other Republicans have used AB5 as a partisan issue to bolster public support and gain votes. Many of us who are lifelong Democrats are so jaded and frustrated by the Democratic party that we voted for at least some local Republicans. The problem that we struggle with now is that the Democratic Presidential Candidates have vowed to pass the Pro-Act. We are without a viable candidate to vote for in the Presidential election, particularly those of us who are members of a protected group, are women, or are part of the LGBTQ community (or are allies). It is important for all of us (no matter where are political views lie) to keep reaching out to our legislators and candidates to let them know how important the ability to have work choices is to all of us.