The labor law that sprang from California Assembly Bill 5 remains a work in progress.
The idea behind the legislation was to make it more difficult for companies to use independent contractors instead of full-time employees.
The net effect seems to be the opposite of what lawmakers sought. Rather than hire the independents in as full-timers, many companies seemed inclined to cut back on their work force, with independent contractors being the first to go.
The law went into effect Jan. 1 and the blowback was immediate. Within days, lawmakers back-pedaled, saying certain groups probably should be exempted. The Legislature and courts began granting temporary waivers for certain classifications of workers.
It seemed clear from the start that wholesale changes to the law would likely happen, but knowing that elected officials at just about every level of government tend to move more slowly than maple syrup in February, many California independent contractors started looking for options.
The obvious solution would seem to be scrap the law and start over, but that might turn out to be politically damaging for many members of the Legislature. So, they’ll likely piecemeal the corrective measures, the timing of which may not help the gig workers forced out of their freelancing jobs.
But such workers do have other, viable options, one of which is for independents to apply for and become limited liability companies, or LLCs.
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As it became clear the Legislature would, in fact, approve the fractious labor law, 2019 applications to the state for LLCs ramped up nearly 6 percent over 2018. The $75 application fee and potential for paying the annual franchise tax are small potatoes compared to flat-out losing your freelance gig. If lawmakers don’t reconstruct the new labor law, it’s reasonable to expect a deluge of LLC requests throughout this year. That might happen no matter what lawmakers do.
Meanwhile, various trade associations and individuals have already applied to the courts for relief, and judges have responded with temporary holds on enforcing the law.
The big unintended consequence of AB5 was the anticipated reduction in jobs available to independent contractors, but another significant impact is a surge in those workers getting business licenses and/or incorporating, which is not a bad thing.
But going into business the licensing route is not what a lot of gig workers want. They prefer the freedom afforded to freelancing, the ability to move on. They are casual workers in every sense of the phrase, meaning if they want to work through the day in their PJs, they can.
We firmly believe none of these avoidance maneuvers will be necessary, at least not for all gig workers. We believe lawmakers in Sacramento have seen the error of their decision-making with regard to the new labor law, and will try to fix it as soon as possible.
Politicians aren’t always the quickest to pick up on new paradigms, but the response to AB5 has been so pronounced it’s difficult to imagine lawmakers won’t recognize the changing nature of California’s labor market, in which virtually every worker carries an internet connection in his or her pocket or purse. New laws should be molded to fit into such a market.
The days of men and women, their children and their children’s children working in the same factories or for the same companies are long gone. For better or for worse, today’s labor market is driven by technology, and businesses’ ability to quickly adapt to change.
And in California, thousands of independent contractors and freelancers just don’t want to give up their gig.