EDITOR’S NOTE: This article has been updated to correct statements originally attributed to Assemblywoman Lorena Gonzalez. Some written statements used in the article were actually submitted by her legislative staff.
CLARIFICATION: The Coast News Group has a full-time editorial and advertising staff that work as employees for the company. Additionally, The Coast News does purchase articles from several freelance journalists that provide most of our reporting, however we do not solely rely on independent contractors or freelance workers to produce our weekly content.
REGION — After three years driving for Uber, “Samantha” can’t afford healthcare or rent payments. Today, the 36-year-old Oceanside resident and college graduate lives with her parents. And a $400 monthly student-loan payment isn’t helping her dire financial straits.
Mostly transporting riders to and from Ocean’s Eleven Casino, Samantha makes between $12 – $13 per hour, after gas and vehicle maintenance expenses are taken into account.
But a bill moving through the California legislature aims to protect people like Samantha (a pseudonym used to protect anonymity due to her tenuous employment status), who represent a large segment of contract-based workers.
Currently awaiting an Assembly floor vote, Assembly Bill 5 aims to “codify” the Dynamex Operations West, Inc. v. Superior Court of Los Angeles California Supreme Court ruling issued on April 30, 2018, according to its author and lead sponsor, Assemblywoman Lorena Gonzalez (D-San Diego).
Dynamex established the “ABC test” to determine whether a worker should receive contractor classification:
(A) the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
(B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed
Under this standard, all workers are considered employees unless a company can establish the individual meets all three conditions to qualify as an independent contractor.
The bill aims to halt misclassification of workers within California’s “gig economy,” with ride-sharing companies Uber and Lyft as its primary targets.
“Misclassification hurts workers and taxpayers,” Gonzalez told The Coast News. “Workers miss out on minimum wages, overtime, social security contributions, health care, workers compensation, unemployment insurance, paid family leave, earned sick leave, and the right to organize. Taxpayers end up paying to subsidize business through Medi-Cal, emergency medical care, food stamps, subsidized housing, free lunch programs, etc., when businesses don’t provide adequate compensation for their workforce.”
Samantha largely agrees with this sentiment.
“I think the law would overall be a good thing,” said Samantha. “Jobs should pay workers a living wage and give appropriate benefits.”
But Samantha added that “such regulation could reduce the availability of some of these rideshare driver jobs, as companies would need to pay us more and spend more on benefits.”
And that’s where things get complicated for the North County workforce.
Many worry that industries which have traditionally operated under a freelance contract business model —and its workers — could face harm from AB 5.
Some of those fears subsided after amendments to the bill were published late Friday night on the eve of Memorial Day weekend.
The most recent changes to the bill would allow for many client-based industries — such as real estate, accounting, architecture, hairstyling or barbering services, law, and others — to receive an exemption to the Dynamex ruling.
The amendments also carve out a new nine-prong test, creating an exemption to the Dynamex ruling for workers and employers who use “a contract for professional service” payment model.
Similar to the ABC test, all nine conditions must be satisfied for an employer to receive an exemption.
Heather Rosing, President of the California Lawyers Association, said that the organization had advocated for the exemption.
“We believe that this exemption will well serve the profession and the clients by allowing law firms and contract attorneys much needed flexibility in their arrangements,” said Rosing.
The architecture industry also expressed appreciation for the latest round of amendments.
“[L]icensed architects do not need the protection of the Dynamex ruling and that it actually is harmful to many small architectural firms that routinely contract with other licensed architects to help design projects,” said Mark Christian, the Sacramento-based Director of Government Relations for the American Institute of Architects California Council. “[The] amendment to exempt architects allows architectural firms and their licensed architect consultants to continue to provide services to their clients in an efficient and legal way.”
Prior to the exemptions, Kirk Effinger— a real estate agent who sells homes in Escondido and San Marcos — expressed concern that the legislation could transform the client-agent relationship within the real-estate industry into a transactional business dominated by online companies such as RedFin.
For Effinger, the real estate exemption provided a sense of relief.
“I’m glad the bill’s authors saw the wisdom in allowing workers who chose their professions in part because of the freedom dependent contractor status to keep it,” said Effinger. “As a long-time real estate industry professional, it was easy for me to see the serious disruption it would cause in our industry, which would ultimately bring negative consequences to homebuyers and sellers we serve.”
According to Jim Ewert, general counsel for the California News Publishers Association, the journalism industry will most likely not receive an exemption.
The Coast News Group, as reported by Voice of San Diego, is one of many small publications statewide that could be negatively impacted by the current version of the bill.
Ewert pointed to one of the nine conditions contained in the amended bill requiring that “the individual has a business license, in addition to any required professional licenses or permits for the individual to practice in their profession” in California.
But journalism, and the bulk of the media industry, does not rely on state-sanctioned or trade association registries. By this condition, journalism would not qualify for exemption.
“[T]he recent amendments to AB 5 don’t provide adequate protection for freelance journalists,” said Ewert. “We are working on a proposal but it still needs some refinement.”
Scott Ashton, the CEO of the Oceanside Chamber of Commerce, also questioned what AB 5 could mean for business-to-business relationships if it becomes law.
“The Dynamex decision was very problematic in that it put a large number of existing business relationships in jeopardy,” said Ashton. “It cast a large shadow of doubt on whether or not mutually productive business relationships could or should continue…AB 5 also fails to provide for business to business exemptions and to address the need for companies to utilize independent contractors to fulfill short term projects.”
Campaign Contributions, Lobbyist “Carve-Outs”
Shortly after providing comment for this story (and before its publication), Gonzalez took to social media with a series of preemptive tweets directed at the The Coast News, questioning the motivations behind the story.
“So, the @coastnewsgroup — after admitting they rely totally on independent contractors & going on twitter to attack my AB5 — is now doing a ‘balanced’ story (not editorial) on the bill,” wrote Gonzalez. “The role of labor & labor attorneys in writing this bill. Let’s be clear, as an attorney who was elected straight out of the labor movement (and a Teamster member) you can be sure labor & at least one attorney has a role in every bill I write.”
And labor unions play a significant role in AB 5.
The California Labor Federation, a collective of 1,200 labor unions representing 2.1 million workers across the state, has voiced its support of AB 5 and is listed as a sponsor of the bill in official legislative documents.
According to California’s campaign finance database, Gonzalez received tens of thousands of dollars of campaign contributions during her 2018 re-election campaign from large labor unions, including State Building and Construction Trades Council of California, California State Council of Laborers, American Federation of State County & Municipal Employees (AFSCME).
Gonzalez collected $17,600 in campaign contributions from the California Dental PAC, $4,400 from Western Dental Services Inc., and $2,000 from California Association of Dental Plans PAC. The dental industry also received an AB 5 exemption.
So, the @coastnewsgroup — after admitting they rely totally on independent contractors & going on twitter to attack my AB5 — is now doing a “balanced” story (not editorial) on the bill. They just gave me until tomorrow morning to answer questions. among them: 1/
— Lorena (@LorenaSGonzalez) May 26, 2019
Public records show a $4,000 donation from Anthem Blue Cross, $1,500 from Kaiser Permanante, $2,000 from Medical Insurance Exchange PAC and $4,400 from Emergency Medical PAC. Both physicians and surgeons also enjoy exemptions within AB 5.
Similar trends have emerged in campaign contributions for Gonzalez’s upcoming bid for California Secretary of State in 2022.
Announcing her run for the office on February 4, Gonzalez since received $9,300 from the California State Council of Laborers PAC, $6,200 from State Building and Construction Trades Council of California PAC, $7,800 from America’s Physician Groups California PAC, $5,000 from the Union of American Physicians & Dentists Medical Action Committee and $8,800 from Blue Shield of California.
Gonzalez said that these campaign contributions did not impact who has and has not received an exemption for AB 5.
“Just like many industries who aren’t exempted donated to my campaign – likely far more,” she wrote in response to a question on Twitter. “That’s insulting. I’m about workers, not industries. If my record doesn’t reflect that, I don’t know whose does.”
And in response to emailed questions about who helped decide exemptions to the bill, Gonzalez asked, “Is this supposed to be a trick question? Yes, I am an attorney. And before I became a legislator, I was a labor leader. Every bill I write has my role in it.”
Gonzalez said that her office worked in coordination with the California Labor Federation to draft the bill.
“However, Dynamex—the case that this bill is codifying—was decided by a unanimous and bi-partisan Supreme Court,” said Gonzalez.
Gonzalez’s office added that all of the exemptions and compromises found within AB 5, outside of the “ABC” test, were written by the California Chamber of Commerce, as well as trade associations representing doctors, realtors, and others in partnership with labor unions.
“Since the bill is largely exemptions at this point, it’s largely been drafted by the Chamber and others,” a staffer in Gonzalez’s office said.
Gonzalez added that more exemptions are still in drafting phase.
“For the ones we have made up to this point, we first looked to language that is currently in statute,” Gonzalez’s staff said in an email. “California wage and hour protections typically exempt workers who make more than twice the minimum wage, which means it is less likely that they will be exploited. These workers are also less likely to be reliant on social and governmental services.”
But Republican Assembly Leader Marie Waldron (R-Escondido) has called AB 5 problematic and disagrees with the court’s decision in Dynamex.
“In light of the disastrous Dynamex ruling, it shouldn’t take lobbyist-inspired carve-outs for Californians to be their own bosses,” Waldron said. “The overwhelming majority of independent contractors prefer the flexibility and control their working situations provide.”
“From high-school students looking for their first jobs to Uber drivers, salon workers and barbers, independent contracting is a valuable tool for Californians trying to cope with the state’s sky-high cost of living,” Waldron continued. “Employers who mis-classify workers should be punished, but destroying the business model that contractors around the state have built careers on isn’t the way to address that issue.”
Steve Horn is a San Diego, CA-based reporter covering Escondido and San Marcos. He works in a full-time capacity for The Real News Network, an online broadcast news ouetlet, covering climate change. He has worked as a staff investigative reporter for the publications Prison Legal News and Criminal Legal News and as an investigative reporter for the climate news website DeSmog.com.
A native of Wisconsin and graduate of University of Wisconsin, Steve is a competitive distance runner, with a personal best time in the marathon of 2:43:04 and nine marathons under his belt. He also has served on the film screening committee for the San Diego International Film Festival.