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California’s gig labor bill hurts the people it’s trying to protect

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So, there’s a new bill in California, Assembly Bill 5, that’s doing immense harm to freelancers across the state and throughout the country. The bill was intended to prevent tech companies from taking advantage of their employees by branding them as freelancers. But the thing took too wild a swing, and a lot of people have gotten hit by it.

We’re going to talk about how and why, but let’s get one thing straight, right off the bat:

We absolutely need something to help workers in this country. When we talk about why AB5 doesn’t work, I want to be very clear that I’m not turning my nose up at the idea of something like it. Rather, it’s this specific law that’s hurting a lot of people.

Let’s take a quick review at the environment that gave rise to Assembly Bill 5:

We live in an incredibly rough economy for most people. The stock market is doing phenomenally! But the stock market isn’t the same thing as the economy. The economy is made of people who are barely getting by, propping up a class of billionaires who are hording an amount of wealth that is increasing at a mind-boggling pace, instead of “trickling down”.

Productivity and wages used to rise together, but they got divorced in the 70s, and productivity’s been doing a lot for herself while wages have just sort of lazed around on the sofa, getting drunk. Productivity has grown 6 times more than pay since 1979. In the last ten years, the costs of education, housing, and medical care have ballooned, while the minimum wage has held steady at $7.25/hour. Not only is this financial climate hard for the average American, it’s going to be hard for a LOT of people, when the purchasing power of the middle class dwindles away to nothing and the bottom drops out of the whole contraption.

And there’s plenty of room for it to keep dropping! Because it turns out that a LOT of tech’s “innovation” just means “circumventing labor laws in ways that nobody’s made illegal yet”. Sometimes the tech world finds cools ways to get money and opportunities to people. Think of crowdfunding, or subscription services like Patreon that let middle-class artists do their thing sustainably.

But often, you instead wind up with companies like Uber, Lyft, and Favor. Rideshare apps view their drivers several different ways. They tell the government that they’re independent contractors. Drivers often claim that they’re running a small business, with the rideshare app’s help. Internally, (and to the SEC) they think of their drivers as the customers. The people who call for rides aren’t the customers—they’re the product that the app delivers to their customer, the driver.

What all of this means is that rideshare companies don’t have to pay minimum wage. They don’t have to offer benefits, like time off or healthcare. If the people who work for you are your customers, instead of your employees, you don’t have to take care of them the same way. (Funny how that works out, right?)
And in some ways, I can see the temptation to do things this way. Insurance is expensive, and it’s kind of wild that we make employers pay for it. Somehow saddling small businesses with that expense is considered the “conservative” option; I’ll never understand how that’s supposed to be good for the market. We’re the wealthiest nation in the world, and yet we’re just about the only country that puts the burden of healthcare on business owners instead of the government.

But here’s the thing: That’s how health care works in this country! It’s what we have. We have a public option, technically. But it’s been systematically gutted to the point of uselessness, intentionally, by people who resent it being passed in the first place. So until we get some kind of national healthcare system, it’s on business owners to make sure that their employees don’t die because they can’t afford medical care. That’s the law, and that’s the ethical thing to do in our current situation.

And tech companies tend not to like that. So we get situations like Uber, where people who are clearly employees are being framed as literally anything else. Because the companies hiring them would rather burn millions trying to render their employees obsolete than spend that money keeping them alive. (Fun side note: Remember when one of those self-driving cars killed a woman because Uber forgot to tell their AI that humans can exist outside of crosswalks?)

And just like I understand why companies would try to dodge those costs (even if it’s clearly wrong), I also understand what AB5 was trying to do. They’re trying to close that loophole. They’re trying to stop companies from BSing about who is an employee and who isn’t. That makes sense.

So the bill defines freelancers with help from a court case, Dynamex Operations West, Inc. v. Superior Court (2018). The main features are

1. Is the worker free from the control and direction of the hiring entity. Is the person who hired them telling them where, how, or when to do the work?
2. Is the work being performed outside of the normal course of business for the hiring entity?
3. Is this work that the worker normally does, independently of this one business relationship? Do they genuinely have their own business in this field? Or is this “freelancing” something they’re just doing for one company?

You can immediately see some huge questions raised here. Among them:

– How strict do you define “telling someone how to do their work?” Because I’ve never had a creative assignment that didn’t come with some sort of deadline, right?
– How do you define “the normal course of business?” The normal course of business for a magazine involves hiring dozens of writers to write hundreds of pieces. Does that stable of writers suddenly get smaller if you can’t afford to give them all benefits?

And we’re already seeing fallout from this. Large multimedia platforms, from Vox to CollegeHumor, are laying off huge swaths of their staffs. Under the new law, writers aren’t allowed to submit more than 35 pieces in a year and still be considered freelancers. That means that these outlets were going to have to either cast a much wider net for their bullpens, or cut their staff and focus on a core group of (presumably grotesquely-overworked) people. Unsurprisingly, they chose the latter pretty universally.

And it’s not just writers. Musicians are getting hit, too. A petition to secure an exemption is nearing 50,000 signatures on change.org. Any creative endeavor other than “a day job with a desk at Disney” is going to involve a network of people floating in and out as projects start and end. There’s a lot of room for exploitation, and there’s a lot of room for quashing that exploitation. But right now, this bill is mostly just putting people out of work.

And just like California’s (much-needed, fantastic) privacy protection laws are having an impact across the country, (because you never know if the data you’re collecting is on a Californian!) so too is their (terrible) freelancing law rippling out. Because work doesn’t happen in offices anymore. It happens everywhere. I recently released a song with musicians from six countries performing on it. That wasn’t even something I was trying to do. That’s just where my friends were!

Now, my piece was just me getting together with some friends to have fun. But professional recordings happen that way, too, all the time. And right now, if the person on either the hiring or performing side of that equation is in California, that relationship is in jeopardy.

And of course, the really fun thing is, that a lot of the industries that were intended as targets of the bill are sidestepping it with court challenges. And many industries lobbied for exemptions, meaning that real estate agents, CPAs, lawyers, surgeons, referral agencies, and lots of others were exempt from the get-go.

So what we’re left with is a law that’s meant to protect people. But many of the people it should’ve protected aren’t covered by it. And many legitimate freelancers are getting screwed out of business relationships that they used to rely on. The big publications that they used as cash cows to pay their bills are either capping them at 35 articles, or letting them go altogether. It’s not hard to see that this is wildly misguided, and that it’s causing more harm than help. We’ve got to pump the brakes on AB5 and try to figure something else out.

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As Congress scrutinizes gig worker rules, small-business owners need to know the basics – The Philadelphia Inquirer

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Uber’s UK ruling could have implications for gig economy startups

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Former Uber drivers Yaseen Aslam and James Farrar first brought their case against Uber in 2016
(Carl Court/Getty Images)

The UK’s Supreme Court has rejected Uber‘s appeal against an earlier ruling that said its drivers must be classified as workers, a result that may have a significant impact on other gig economy companies.

The decision—which cannot be appealed—means thousands of UK Uber drivers cannot qualify as being self-employed, entitling them to both minimum wage and holiday pay. The ridehailing company could now face paying substantial compensation to its drivers.

The ruling, which criticized Uber for sidestepping UK labor laws to withhold benefits, could influence other battles between gig workers and the companies that hire them. Earlier this month, the Independent Workers’ Union of Great Britain appealed against a court decision preventing riders for food delivery startup Deliveroo from engaging in collective bargaining due to their self-employed status. Deliveroo, which is backed by investors including Durable Capital Partners and Amazon, is looking to go public this year.

“Employees should benefit from improved rights; however, employers are likely to face increased costs of labor and disruption to their business models, which have proven to achieve rapid scale with gig workers,” said PitchBook analyst Nalin Patel. “The ruling may also now set a precedent in the UK and force other gig economy startups that utilize the self-employed contractor model to rethink how they operate in the region moving forward.”

Former Uber drivers James Farrar and Yaseen Aslam originally won their tribunal against Uber in 2016. Uber appealed the decision, but it was upheld in 2017, and again in 2018 by the High Court.

“This ruling will fundamentally re-order the gig economy and bring an end to rife exploitation of workers by means of algorithmic and contract trickery,” said Farrar, who is also a general secretary with the App Drivers and Couriers Union. “Uber drivers are cruelly sold a false dream of endless flexibility and entrepreneurial freedom.”

In a statement, Uber’s regional general manager for Northern and Eastern Europe, Jamie Heywood,  said the court decision was focused on a “small number of drivers” who used the app in 2016. Since then, he said the company had made changes to its business,  providing free insurance in case of sickness or injury. He added: “We are committed to doing more and will now consult with every active driver across the UK to understand the changes they want to see.”

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The future is now for gig-based entrepreneurship – San Gabriel Valley Tribune

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With Californian Kamala Harris as vice president, it’s clear the new Biden administration is taking its cues from the once-Golden State on labor policy.

In one of its first acts in office, the Biden Administration placed a regulatory freeze on a Department of Labor regulation enacted in the waning days of the prior administration relating to independent contractors.  The rule, according to labor and employment law firm Fisher Phillips, “aims to make it easier for businesses to classify workers as independent contractors.”

It’s unlikely this rule to give more workers freedom to be their own boss and set their own schedules will survive in a Biden administration that was heavily reliant upon labor unions for money and manpower to win the 2020 campaign.

Meanwhile, House Democrats recently re-introduced the controversial PRO Act in Congress, which “seeks to reduce the use of the independent contractor classification by companies such as Uber,” according to CNBC.

Both of these efforts followed the lead of California’s liberal legislative majority, which two years ago enacted the controversial Assembly Bill 5 to severely restrict the ability of Californians to work as independent contractors.  Their goal is to increase union membership and dues and force people to work in traditional, 9-to-5, union jobs that are relics of the past.

Doubling down on AB 5-type restrictions at the national level – which may be the Biden administration’s goal with the nomination of Julie Su, California’s chief AB 5 enforcer, as deputy Secretary of Labor – would be a tremendous mistake.  It would threaten innovation and hurt the ability of Americans who have lost their jobs to put food on the table during a global pandemic.

As documented in the new Pacific Research Institute study, “The Small Business Gig,” Americans are increasingly working in the gig economy.  They don’t want government – whether in Sacramento or Washington, DC – dictating how they can earn a living.

A 2018 Gallup survey found that 36 percent of U.S. workers have some sort of a gig worker arrangement.  Whether renting out an extra room to earn cash to pay the mortgage or using an app to earn a living on an alternate schedule, the gig economy is increasing opportunities for Americans to become entrepreneurs, while providing customers with lower cost services.

Many in California state government see the gig economy as exploitative and disruptive.  But data from the ADP Research Institute shows that 70 percent of gig workers are independent workers by choice.  Gig Economy Data Hub research found that more than two-thirds of gig economy workers are satisfied with their current work arrangement.

Government shouldn’t pick winners and losers in the economy.  New restrictions on the gig economy, like those proposed in Congress, will limit people’s freedom to become entrepreneurs while institutionalizing the old way of doing work.

Instead of adopting regulations at the federal level that 58 percent of Californians – Democrats, Republicans, and independents alike – rejected when they passed Proposition 22 in November, the Biden administration and Congress should take the opposite approach and enact market-based policies to encourage entrepreneurship and innovation.

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