Will the passage of Proposition 22 in the Nov. 3 election mark the death knell of AB 5?That is what opponents of the state law that defines nearly all workers as employees, rather than independent contractors, hope will happen.The ballot measure Prop 22 grants an exemption from AB 5 to drivers of ridesharing and delivery services, such as Uber Technologies Inc., Lyft Inc. and DoorDash Inc. It doesn’t directly affect other workers.AB 5 went into effect in January and sets out a three-pronged test to determine if an independent contractor should be classified as an employee. In September, a clean-up bill, AB 2257, was made into law that carved out certain professions as exempt from AB 5.AB 5 has its origins in a lawsuit filed against Dynamex Operations West Inc. by a class of drivers for the company that claimed they were misclassified as independent contractors instead of employees. The California Supreme Court ruled in favor of the drivers in a landmark decision.
Tom Manzo, founder and president of the California Business & Industrial Alliance in Sunland backed the passage of Prop 22 but said it would have been nice if more professions would have been included in the exemption.
Manzo believes AB 5 was passed with the intention of unionizing Uber, Lyft and some large truck companies.
“In their quest to unionize them, they make AB 5 a law and it ends up harming hundreds of job classifications that ends up harming hundreds of thousands of workers,” Manzo said.
“The need to create lasting economic security for our workforce demands action,” Gov. Gavin Newsom said in a statement when he signed AB 5 into law last year. “Assembly Bill 5 is an important first step. The next step is creating pathways for more workers to form a union.”Attempts to reach the California Federation of Labor and the Los Angeles County Federation of Labor, which opposed Prop 22, were not successful.But in a release from late October, the county labor group presented statements from political leaders and those who are affected by Prop 22 voicing why people should vote against it.
Among them were James Wiest, who has driven for Uber, Lyft and Postmates for seven years, and is a member of the Mobile Workers Alliance.
Wiest said that Prop 22 was an attempt by “billion-dollar companies like Uber, Lyft and DoorDash” to roll back basic rights and protections for workers.“If you care at all about things like the minimum wage, access to health care, the 40-hour workweek, unchecked corporate power, or the ability for workers to have a say on the job – then you must vote no on Prop 22,” Wiest said in the statement.Manzo believes it is the state labor federation that is behind laws such as AB 5 and supports the lawmakers who push for them, such as Lorena Gonzalez (D-San Diego). In addition to successfully sponsoring AB 5, Gonzalez also passed the law that increases the state’s minimum wage for all employers to $15 by 2023 and a bill enabling millions of Californians to earn paid sick leave.
Prop 22 takes the largest employers in the gig economy off the table for unionization. Manzo said with AB 5, labor tried to push its agenda and lost.
“I personally feel that Lorena Gonzalez at this time needs to just pull the plug on AB 5 and get rid of it,” he added.
‘Repudiation’ of lawProp 22 passed by a comfortable margin of 59 percent, or 9.3 million votes, versus 41 percent or 6.6 million “no” votes with 93 percent of precincts reporting, according to the Los Angeles Times.
Stuart Waldman, president of the Valley Industry & Commerce Association, the Van Nuys business advocacy group, called the number of yes votes for the ballot measure “a complete repudiation” of AB 5.
Waldman believes that now state lawmakers will somehow modify the law.“I think they have to,” he said. “The writing is on the wall because if they don’t, in two years it is going to be taken out at the ballot box.”Waldman was referring to the next statewide election in 2022 when a ballot measure to repeal AB 5 could be placed before voters.“They are in a tough position where they have to negotiate; otherwise the business community will come together and repeal AB 5,” he added.
Karen Anderson, founder of Freelancers Against AB 5, is among those who support a full repeal of the law and will work to get it on the 2022 ballot.
“We are going to put our focus on that,” she told the Business Journal.
Her group has about 19,000 members, she said, and she has heard many stories from them about how AB 5 has upended their lives and their careers.
While Uber and Lyft drivers got massive media attention during the run-up to the election, Anderson points to other professions that are affected by the law and did not receive an exemption in the clean-up bill.The way that AB 5 and AB 2257 were written shows that lawmakers have little understanding about the industries they are regulating and supposedly helping, Anderson added.
“It is politicians playing with people’s lives like they are paper dolls in a dollhouse,” she explained. “It is very destructive.”‘Twists and turns’AB 5 sets up an “ABC” test with three prongs to determine if a worker is an employee or an independent contractor. Prong A questions who has the “right to control” and requires the independent contractor to prove that he or she cannot be told by the hiring entity what to do, when to do it or how to do it. Prong C is that independent contractors must be set up as real businesses with an office, business cards and their own equipment.Prong B is the major shift that affects employers and workers in the gig economy. This rule states that the work must fall outside the usual course of the hiring entity’s business. The legislature’s example of Prong B involves a bakery and its hired cake decorator, an independent contractor. Under the rule, the decorator must be classified as an employee because the service rendered contributes to the company’s finished product – a cake sold at the bakery.Anderson’s group has identified 400 categories of professions that have been impacted by AB 5. They include music therapists, occupational therapists, meeting and events professionals, radio engineers, rig welders, auctioneers, sheep shearers, licensed pharmacists, grant researchers, independent film crews, choreographers and optometrists.Sign language interpreters were included among the groups receiving an exemption but only about 25 percent of them can meet the requirements, Anderson said.In the clean-up bill there are a lot of fine print and hoops to jump through and there are freelancers who will not be able to take that leap, she said.
“There are a lot of twists and turns with it,” Anderson added.
There are legal challenges to AB 5 making their way through court system. The American Society of Journalists and Authors and the National Press Photographers Association sued the state in December and currently have their case before the federal Ninth Circuit Court of Appeals.Also before the Ninth Circuit is an appeal by the state against a lawsuit filed late last year by independent truckers represented by the California Trucking Association who wanted to get a restraining order on enforcement of AB 5. A lower court granted the order, and the state appealed.
And the case that started the ball rolling on AB 5, the Dynamex decision of 2018, is still being litigated. Earlier this month the California Supreme Court heard oral arguments on whether the case’s three-pronged test could be applied retroactively by four years.
“That is another big shoe that could drop,” Anderson said.