There is no way around it — California’s Assembly Bill 5 has been a disaster for our state.
The so-called “gig economy” legislation passed last year has been a short-sighted and dangerous attack on nearly 10 percent of our state’s workforce. What’s worse, businesses continue to be attacked on all sides from attorneys looking to exploit the vague “ABC test.”
And all this is peaking during the worst health crisis in a century, when millions of Californians remain jobless and small businesses are struggling to survive.
Let’s break it down.
In a misguided effort to “protect” more workers in the golden state, our legislature passed AB 5, disrupting the rapidly emerging gig economy by requiring employers to classify nearly all independent contractors as employees — eligible for all the benefits that coincide with that classification.
There has been lawsuit after lawsuit filed over the “ABC test” and it looks like these cases won’t stop until compromising legislation is reached, such as Prop 22. Just look at the most recent case from California Labor Commissioner. The state is suing both Uber and Lyft for misclassifying employees and alleging wage theft, an example of unnecessary litigation used in an attempt to find a solution.
What many don’t know is the role that plaintiffs’ attorneys play in this process.
It is emerging as a lucrative endeavor to hunt down businesses that employ independent contractors in an attempt to sue them into falling in line with the rest of the state. With the vague ABC test as their primary weapon, the burden then falls on businesses to prove they are in compliance with the new law.
Unfortunately, this rarely works out, and more and more California businesses are falling victim to this latest gambit. The Ubers and Lyfts of the world are getting the most attention, but we cannot forget the effects the ABC test has on smaller businesses.
As the president and CEO of the California Black Chamber of Commerce, I have witnessed how this has especially damaged the minority community in our state. Many Black Californians work hard to provide for their families, often through two or more streams of income. When businesses are bombarded with lawsuits or are forced to layoff employees because they can’t afford full-time benefits, these alternate income streams dry up, and many then struggle to provide for their families.
Because of COVID-19, this has all been made significantly worse. As workers are furloughed or laid off, they are looking for temporary or even permanent new job opportunities, and many of these have traditionally come through work as independent contractors. But as attorneys continue to exploit an already misguided law, these opportunities are fewer and further between, and our minority communities have paid the price.
Before AB 5, California was home to an estimated two million independent contract workers. Whatever your position may be on the new law, it is certainly an unprecedented time throughout our state and the country at large. In light of record unemployment and continued economic woes, we must do everything we can to get Californians back on their feet and businesses back to serving customers. A prudent first step would be protections for businesses who could use independent contractors to pay their workforce and stay afloat — instead of cutting jobs or even shutting down for good.
I urge our lawmakers to recognize the unique and difficult situation we are all facing and protect businesses from predatory AB 5 lawsuits. We all win when businesses can reopen and more Californians get paid.
Edwin Lombard is the president and CEO of the California Black Chamber of Commerce.