Following the Dynamex decision by the California Supreme Court in March of 2018, legislation last year pushed the worker classification issue into full public view and political debate. The bill, AB 5 (Gonzalez), which initially targeted the “gig economy,” was passed in September 2019 and went into effect on January 1, 2020. However, in the bill’s journey through the legislative process, several exemptions were created, and various types of businesses and professions were exempted from the Dynamex decision. At the end of the Legislative session last year, AB 5 became a major target for supporters of the gig economy as well as advocates for the many businesses not fortunate enough to obtain an exemption. That criticism has continued since and is now playing out with the beginning of the new session.
Through the debate last year, Assemblymember Lorena Gonzalez promised legislators in both houses of the Legislature she would continue to work with business and industry to consider additional exemptions and flexibility in the provisions of the bill relating to the Business2Business exemption. The reality, however, is she has spent more time defending her bill from critics than entertaining changes in the bill. As more professionals and businesses have come to understand the full implications of AB 5, there have been growing calls for repeal, additional exemptions, and more flexibility in the ABC Test placed into statute by the legislation.
Some of the groups calling for exemptions have additionally filed lawsuits over the law’s provisions. The American Society of Journalists and Authors, and the National Press Photographers Association, have filed a lawsuit in federal court back in mid-December claiming that the new law is unconstitutional as it limits free speech and the press. Currently, freelance writers, photographers, editors, and cartoonists are only exempt if they produce no more than 35 works annually for an individual client. On December 31, 2019, a U.S. District Court judge denied a motion for an emergency stay for implementation of the new law on these freelance groups.
The California Trucking Association has also filed a suit against the new worker classification law and have had more favorable rulings. They asserted that the new law hurts independent drivers who use their own vehicles and set their own schedule and is preempted by the Federal Aviation Administration Authorization Act (FAAAA) prohibiting the states from enacting laws that impact interstate commerce. Citing the FAAAA, a federal judge issued a temporary restraining order on the law applying to truckers.
Then there are the tech companies who have been the primary target of this worker classification. Following the passage of AB 5, Uber, Lyft, and Postmates committed $90 million toward fighting the measure through the citizen’s initiative process to exempt them from having to reclassify people providing services with their apps. In addition, Uber and Postmates joined two individuals to challenge the new law as it applies to these on-demand, otherwise known as “gig” jobs. The plaintiffs, led by the two individuals, claim in their suit they seek to “protect their constitutional rights and defend their fundamental liberty to pursue their chosen work as independent service providers and technology companies in the on-demand economy.” Their lawsuit contends AB 5 provided neither due process or equal protection and is thus unconstitutional.
Uber and other technology companies in the on-demand economy have proclaimed they do not intend to reclassify workers who use their apps. They argue their platforms primarily serve a technology function that connects contractors with customers, or rents transportations devices such as bikes and scooters. In some cases, they are making changes in their systems to support these arguments like adding variable pricing features to allow drivers, delivery workers, and others to set variable rates.
In the first month, the California Legislature has been back in session, there has been no shortage of bills introduced to amend or even get rid of AB 5 entirely. For example, there are bills to remove the sunset on the exemption for newspaper carriers (SB 867), add an exemption for small businesses with fewer than 100 employees and less than $15 million in gross receipts over three years (AB 1925), remove an arbitrary limit on articles for freelance writers, editors, and cartoonists (SB 868), exempt freelance translators and interpreters (SB 875), and a full repeal of AB 5 and implementation of the Borello standard (AB 1928). Most of these clean-up measures are authored by Republican members and are considered long-shots to make it through the entire legislative process. However, Assemblywoman Gonzalez recently introduced AB 1850 as the new legislative vehicle for additional exemptions or possible compromises in the application of the ABC Test. It is expected freelance journalists, real estate appraisers, physical therapists, field services industries, musicians, movie industry professions, and many more will be lining up for an exemption.
If the Uber/Lyft lawsuit is successful, AB 5 and its list of exemption may well be thrown out in total and the entire process and approach may well have to be changed to comply with due process and equal protection. Stay tuned…
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