California's New Gig Law, AB5, Ignores the Growing Role of Remote Work

Business Insider's California is attempting a massive labor experiment that could grow into a disaster for millions of workers outlines some of the many problems with California's new AB5 worker classification law.

It's written by a self-employed multimedia journalist based in Los Angeles. He describes a key issue as:

"I have an independent business, I don't get paid vacations, and I have to cover my own health insurance. I've made these trade-offs for career flexibility. But the state's new Independent Contractor Law, Assembly Bill 5 (AB5) assumes that I'm being exploited and should be an employee, whether I want to be or not."

The author goes on to say that while well-intentioned, AB5 was "haphazardly written and rushed through the legislature, and it doesn't account for the way tens of thousands of freelance professionals in the state work."

Because of this, a lot of self-employed Californian's are likely going to be hurt by the law. 

This is especially true because more and more work can be done remotely. 

This means California firms can get around AB5 simply by hiring contract workers who reside outside the state. 

As the article points out, this is already happening. Key quote:

"There are already examples of a California backlash. Patch Media has placed an ad looking for reporters to cover stories about California, so long as the reporters don't actually live in California ... Some employment listings ... come right out and say it: "Due to legislative restrictions, residents of California and Massachusetts are not eligible for this opportunity." Massachusetts has a similar though less restrictive law."

Echoing this, we recently met with a large California based corporation. They told us because of AB5, they had decided to stop hiring independent workers in California.

They also plan to increase their use of remote independent workers located outside of the state.

Also echoing this comes from the LA Times article Opinion: California is making the writing life even harder. Key quote:

"Facing ever narrower margins, media companies prefer to avoid the time and cost of parsing the law and any risk of running afoul of it. They can turn to the many good writers who live in the other 49 states."

We obviously have mixed feelings about AB5 but agree that its intent was well-intentioned.

Nor do we think AB5 should be repealed. There are a lot of misclassified workers in California who should be classified as employees.

Many of these workers would benefit from and prefer being a traditional employee. And AB5 could be a good starting point for fixing these problems.

But it needs to be reworked and amended because it ignores the reality of three key work-related trends:

1. remote work is growing and a state-level law, like AB5, is easy to bypass by using workers located outside of the state.
2. more workers want the autonomy, control, and flexibility that come with being self-employed. Forcing these workers to be traditional employees is bad policy.
3. companies want greater workforce flexibility. Limiting their flexibility will result in firms hiring fewer California workers.

There are lots of examples of legislation that attempt to stop or turn back change. They rarely work. 

Both the legislature and California Governor Newsom have indicated a willingness to amend AB5. We hope they're serious and quickly move forward on fixing the clear problems associated with his legislation. 

Comments

[Liz Tanner]

I just had a fantastic writing opportunity force me to be an LLC to work for them for no other reason than I live in Los Angeles, California. If that were not an $870 slap in the face before I even worked for them, that would have likely been feasible. But, it is not; thus, an opportunity that would have opened many writing opportunities, for which I qualified and accepted their offer, and accrued the income required to make my taxes, eat more than twice a day, and afford health insurance have been taken from me by this law. I am fantastically happy that Uber and Lyft got their benefits. Now, I ask, where are my benefits? Where is my ability to remain self-employed? Where are my rights?