California Labor Commissioner Lilia Garcia-Brower has filed her office’s first lawsuit against a company for allegedly violating labor laws by classifying its workers as independent contractors instead of employees.
Unlike independent contractors, employees in California are entitled to minimum wage, overtime, rest periods, reimbursement of business expenses, paid sick leave and various notifications, including specific information that must be printed correctly on pay stubs.
But companies in the gig economy have thrived by creating apps that allow willing buyers of services to find and pay willing providers of those services. That’s the business model of Uber, Lyft and the company that was just charged with violating state labor laws under Assembly Bill 5, the 2019 law that made it generally illegal for companies to hire independent contractors.
The labor commissioner chose a Bellflower company called MobileWash to be the first target of an AB5 enforcement lawsuit. MobileWash uses an app to offer car wash and detailing services. Customers order and pay for the services, including a tip, and workers use their own cars and supplies to go to the customer’s vehicle and provide the services that were ordered.
This arrangement works well for the company, the customers and the workers, or none of them would be participating in it. That’s not good enough for the state of California. An analysis by the labor commissioner’s office calculated that a MobileWash employee working 10 hours a day, six days a week, is entitled to $1,521 in weekly wages, penalties and damages.
On what planet are these bureaucrats living?
MobileWash and companies like it are never going to operate like a factory, with employees clocking in and out during their breaks in a 10-hour workday. The concept offered by these companies is services on demand. If they’re required to keep a full-time workforce standing by across a wide region such as Southern California, there will be no MobileWash, and there will be no companies like it.
Who benefits from that?
Not customers, who will lose access to a convenient and affordable service. Not workers, who will lose the opportunity to pick up extra cash by working when and where they choose. Not investors, who will decline to provide the start-up funds for innovative companies that are certain to be hounded into bankruptcy by bureaucrats enforcing California’s senseless law against freelance work.
In May, California Attorney General Xavier Becerra and a group of city attorneys in the state filed a lawsuit against Uber and Lyft, charging the companies with wrongfully classifying drivers as independent contractors in violation of AB5, which according to the state requires the companies to make its drivers employees. The lawsuit is seeking penalties and back wages for drivers that could total hundreds of millions of dollars.
Uber and Lyft, joined by restaurant-delivery service DoorDash, are backing an initiative on the Nov. 3 ballot that would exempt them from AB5. State lawmakers have already granted exemptions from the law to companies and workers in some industries, while leaving others out in the cold.
AB5, authored by Assemblywoman Lorena Gonzalez, D-San Diego, is based on an outdated caricature of the workplace in which employers are rich robber barons and workers can only avoid exploitation by joining labor unions.
Union membership is declining. In California, many businesses are struggling. Many workers are struggling. Nothing is improved by the state filing lawsuits to stop people from earning an honest living.