California Assembly Bill 5, written by San Diego Democrat Lorena Gonzalez, limits freelance writers to 35 submissions per publication, per year, a direct attack on the writers’ ability to make a living and an infringement of their right to free association and free speech. The measure also restricts the independence of those who drive for ridesharing companies and musicians who thrive in the “gig economy.” On top of all that, the measure also shapes up as a money grab.
Some California music stores rent out rooms to independent music teachers who get paid directly by their students. According to one music store owner, AB 5 ignores this reality and seeks to treat the teachers as employees of the store. This will be enforced retroactively and fines could run into hundreds of thousands of dollars. Music stores are competing with online vendors, and AB 5 will surely put many out of business. One music store owner told this writer AB was the worst bill ever to emerge from the California legislature, and he has a strong case.
Assemblywoman Gonzalez, an attorney, is not qualified to judge the way people choose to earn a living. Her AB 5 is a frontal assault on the free market and voluntary exchange. The measure harms the ability of writers, photographers, and musicians to earn a living. On top of that, AB 5 is a money grab, in a state that already imposes the nation’s highest income and sales taxes. AB 5 is evidence that government greed is never satisfied.
California is as resilient as ever in the face of the unknown. Aside from wildfires, a global pandemic, and the resulting mass exodus from urban centers, a major concern for businesses that rely on gig workers has been California’s new AB-5 ruling.
To start, we’ll need to fully clarify what exactly AB-5 is, along with its resulting implications. California Assembly Bill 5 (AB-5) is a California law that went into effect January 1, 2020, that “…requires companies that hire independent contractors to reclassify them as employees, with a few exceptions,” according to Investopedia’s Rebecca Lake.
This law has been spotlighted as of late given three major gig-worker employers — Uber, Lyft, and DoorDash — have resisted enacting its mandates since its passing. The very same companies, however, have been reprimanded for their lack of compliance to AB-5, and “…on Aug. 10, 2020, California Superior Court Judge Ethan Schulman ordered the companies to reclassify their contract drivers as employees with the same protections and benefits as their other staffers,” Lake continues. This means that these companies would become responsible for providing the same benefits that traditional employees are entitled to, including workers’ compensation, unemployment insurance, family leave, and much more.
That’s not all there is to the story. On September 4, 2020, an additional law was passed that created exceptions for numerous types of professional gig workers, stating these individuals would be exempt from the mandates of the AB5 ruling, including (but not limited to): insurance agents, certain health care professionals, securities broker-dealers, investment advisers, certain types of salespeople, real estate agents and more.
That said, there are several red flags with this approach for the everyday gig-worker in California. This law is about to set a precedent that would extend employee classification to gig workers employed by companies like Uber, Lyft, DoorDash and more, which would be impossible to enforce in one single month. Plus, it would be very costly for said businesses and majorly disrupt not only their operations, but also the livelihoods of the tens of thousands of people who work for them. There will also almost certainly be more professions that crop up and need inclusion on the already running list of exemptions, triggering the need for added layers of legislation, and so on and so forth.
In response to these issues, gig worker-supported businesses shelled out almost $200 million to support a state ballot measure known as Prop 22, which California citizens voted to pass in November. Companies like Uber, Lyft and DoorDash will now be exempt from reclassifying gig workers as employees. Associated gig workers would maintain their independent contractor status, while wage, safety and benefit standards would be implemented. This will include items like health care compensation.
Prop 22 at a glance
Business operations impact:
Business remains uninterrupted
Business is not responsible for worker productivity
Companies must pay at least 120% of min wage for every hour spent driving
Insurance that covers illness/injuries on the job
Pros for gig workers
Work whenever/schedule not dictated by employer
Free to seek work elsewhere
New policies prohibiting workplace discrimination
Employers required to develop sexual harassment policies
Pros for consumers
Prices for services remain low
Greater access to rideshare/delivery services
Shorter wait time
Drivers required to undergo background checks/safety training
Pros for major players, like Uber, Lyft and Doordash
Save the cost of overhead, benefits, severance, payroll tax, unemployment insurance, etc.
Don’t have to reimburse for fuel or vehicle expenses
What Prop 22 means for gig workers
It is clear that the introduction and intention of AB-5 is to fight for better compensation for workers, but where it falls short is in its attempt to forcibly weave outdated processes into a modern economic issue, without any actual beneficial fix.
Failure to pass Prop 22 would have completely removed the option for thousands of individuals who rely on those positions to earn extra income. Up to 76% of Uber drivers alone would have lost their jobs, leaving 158,000 Californians scrambling to find other ways to earn an income — which could prove exceptionally difficult in the current pandemic-driven economic climate of mass furloughs and unemployment spikes.
With Prop 22′s approval, workers maintain their independent contractor status, leaving the door open for these individuals who earn money from these services to continue to earn.
The NAACP, one of the largest proponents of Prop 22, offered a unique perspective. In their eyes, gig work like driving for Uber, Lyft or DoorDash “…provides an accessible, low barrier-to-entry way to earn income for those who often find traditional employment challenging — communities of color, seniors, disabled veterans and those formerly incarcerated.”
It’s also important for all of us to think about the impact that access to this type of gig work can make in the lives of immigrant workers. A recent article by Greg Ferenstein sheds light on the huge population of Brazilian drivers in San Francisco. “Many escaped South America’s terrible economy to learn English and earn a better living in the global market,” he writes. “It’s hard for them to pass interviews for employee work. While driving, they practice speaking with passengers with the hopes of one day returning and providing for their family with the kind of money that a bi-lingual speaker can make.” Moreover, not every gig worker wants to become a traditional employee. Many enjoy the freedom and flexibility that the gig work lifestyle provides.
Regardless, the consequences of Prop 22 will have long-lasting impacts on gig workers in California and set a precedent for the rest of the country.
The future of gig work in California and beyond
The gig worker ecosystem as it is in the U.S. is far from perfect, and the legislation and protections provided to this broad spectrum of workers is in need of a major overhaul. The truth is that some independent contractors need more protection than others. For instance, an Uber driver earning $20 an hour will need a much more robust safety blanket than a data scientist earning $350 an hour, and is exactly why different structures should apply.
A universal solution simply does not exist, and AB-5 is not the right way to get closer to a semblance of balance. “Ultimately, the greatest impact of Prop 22, passage or not, may actually be felt outside of California,” wrote Joel Feldman of Slate Law Group. “As the legal challenges over AB-5 show, labor laws were not prepared for the gig economy and current regulations did not anticipate the use of independent contractors in such a way and at such a large scale.”
This is sure to be one of the most significant cases in a long string of such laws in states throughout the U.S. California’s decision will likely determine the outcome of our country decides to navigate these issues, now and in the future.
Ride-hailing and food delivery companies like Uber Technologies Inc., DoorDash Inc. and Lyft Inc. are preparing to roll out benefit packages that include health insurance subsidies for their gig drivers in California, a move that experts say could benefit managed care providers.
The healthcare subsidies are one of the results of California voters approving Proposition 22 in the Nov. 3 general election. The measure allows gig economy companies to continue treating their drivers as independent contractors rather than employees but also requires them to offer certain benefits comparable to those of full-time employees.
Under the provisions of Prop 22, gig employers must provide subsidies consistent with the average employer contributions required under the Affordable Care Act, which would enable contractors to buy healthcare coverage. Beginning in 2021, drivers will receive subsidies each quarter after they submit proof of coverage either via private carriers or through the exchanges.
“If drivers were to pick an insurance coverage through the exchanges or the individual market, UnitedHealth and Anthem would be well-positioned to absorb this demand because they offer cost-effective access to healthcare services through a large network of physicians, hospitals and outpatient facilities,” Hardy said in an interview.CFRA Research analyst Sel Hardy said the new law could present profitable opportunities for carriers such as Anthem Inc. and UnitedHealth Group Inc.
Piper Sandler analyst Sarah James said Centene Corp. and Molina Healthcare Inc. could also benefit from the new measure.
“Insurance companies are making anywhere from low- to high-single-digit margins on exchange products,” James said in an interview. “Centene is one of the largest exchange providers and they’re also, from a percent of total company earnings perspective, the most exposed to that business.”
The subsidies will be based on drivers’ engaged time with passengers, which is limited to driving to, picking up and transporting customers to their destinations. Time spent waiting between gigs would not count.
Drivers engaged between 15 and 25 hours a week would receive subsidies amounting to approximately $184 per month, while drivers engaged more than 25 hours per week would receive subsidies of about $367 per month.
The new law also requires network companies to provide on-demand occupational accident insurance to cover medical expenses, up to $1 million, as well as lost income resulting from injuries or illnesses suffered during engaged time. Disability payments and death benefits also must be similar to those provided by workers’ compensation.
However, gig employers do not have to offer other protections such as workers’ compensation and unemployment insurance, nor do they have to provide for family leave or sick leave or allow workers to form labor unions.
The measure overrides California Assembly Bill 5, signed into law in September 2019, which sought to bring labor protections to more gig workers and force companies to classify them as employees.
The industry responded by pushing Prop 22 and spending $200 million to back its passage. The measure was approved by a 58% to 42% margin.
The measure is scheduled to be officially approved by California Secretary of State Alex Padilla on Dec. 12 and go into effect on Dec. 17.
Labour is looking at extending employment rights for workers in the so-called “gig economy” under plans detailed in a new think-tank report.
Precarious workers like Deliveroo riders and Uber drivers would get the same rights as other employees and have their rates set by collective bargaining, under the proposals being examined by Ed Miliband.
While the party’s final policies are yet to be decided, the shadow business secretary said new blueprint drawn up by Common Wealth contains “useful insights” into how workers’ rights could be extended.
Many workers currently miss out on basic employment rights because firms have successfully argued in court that they are in fact self-employed – a loophole that leaves them without holiday pay and even minimum hourly wages.
“There is nothing innate in the concept of the platform that means that work organised through it should be precarious, badly paid, or lacking in control,” the Common Wealth report argues.
Pinpointing “a weakness of regulation and the wider power imbalances” in the labour market, the think-tank recommends closing the loopholes exploited by tech companies to run down pay and conditions for workers on their platforms.
It says this could be done by creating a new “worker” legal status covering all jobs, whether agency workers, bogus “self-employed” or employees. There would be a “statutory presumption that all individuals qualify as employees unless the employer can demonstrate that they are genuinely self-employed”.
This would ensure all workers enjoyed rights such as statutory redundancy pay, sick pay, maternity, paternity, and adoption leave and holiday pay – which many do not currently get.
Zero hours contracts would also be scrapped and replaced with flexible contract that guaranteed employees a minimum number of hours, based on the existing German model.
Responding to the report, Mr Miliband, who sits on the board of the think-tank, said: “Digital innovation and developing technologies offer big opportunities for society, but we must ensure that companies do not wield excessive and anti-competitive power, so that technology works for the public good.
“This report provides useful insights into key ideas and concepts, including looking at how workers rights could be enshrined in light of the changing use of data; and how a National Investment Bank could help catalyse private investment in projects focused on the public good.”
The report also suggests that digital platforms like Deliveroo and Uber should be regulated like public utilities if they achieve monopoly status. It also
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Mathew Lawrence, report co-author and Director of Common Wealth said: “There is nothing fixed or inevitable about how the digital economy operates.
“Though the monopoly power of the platform giants is producing a series of stark economic and social challenges, we can reimagine their power and recode how they operate. That should start with a new deal for all workers.”
He added: “But we should go further. A new architecture of multi-stakeholder ownership and control, giving suppliers and users of the platform genuine voice and control, can better unlock the democratic and enlivening potential of platform technology for all.”