The Battle Over AB 5 Rages On

The landmark legislation changes everything and nothing at the same time for gig workers and beyond.

Within a decade, Uber and Lyft drivers went from touting a life liberated from the constraints of a 9-to-5 job to serving as the poster child for flaws in the independent contractor classification. They and other gig economy workers took to the streets to share their economic hardships despite 60-hour work weeks as California sought to change their status.

Governor Gavin Newsom signed Assembly Bill 5 on Sept. 18 to great fanfare, theoretically improving labor standards for an exploited class of workers. But it also showed just how many types of workers earn their money as independent contractors.

Doctors, lawyers, real estate and insurance agents, engineers, commercial fishermen, grant writers, and architects were among those exempted. Unlicensed manicurists, freelance writers and photographers, campaign workers, strippers, janitors, and construction workers, on the other hand, must be put to a new test that will have their companies classify them as an employee.

At least, that’s what’s promised. Since AB 5’s passage, conversations around the law have been nothing short of a mess as companies prepare to change their operations. Some types of workers, most vocally freelance writers, fear further turbulence to their industry will make for unlivable earnings.

“Given my age and the current state of the media business, I figured freelancing was my best hope for editorial work,” says Stephen Beale, a 60-year-old longtime Bay Area writer who was laid off earlier this year. “Obviously, the timing couldn’t be worse given the [California Supreme Court] Dynamex decision and passage of AB 5.”

In a way, writers have made for odd bedfellows with Uber and Lyft, which have used perceived loss of flexibility as a cudgel against the legislation. The companies said they simply do not believe it applies to them as they are an app, and joined DoorDash, Postmates, and Instacart in pouring more than $100 million into a ballot measure that undermines AB 5.

So what exactly changes come Jan. 1? Everything and nothing.

“What we’re having right now is a natural confusion that no one understands labor law,” says Assemblymember Lorena Gonzalez, who authored AB 5. “People are being introduced to notions that they never understood in the first place.”

(Art by Sophia Valdes)

In April 2018, the California Supreme Court made a ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angelescommonly known as the Dynamex decision — that changed how state law classifies employees. It updates a previous ruling known as the Borello standard to add an “ABC test.”

The ABC test requires that the worker must be free from the direction and control of the work, that they perform work outside the company’s usual business, and that they regularly do work of the same nature outside the company. In short, the burden of proving independent contractor status is on the company. 

Confusion erupted and lawmakers felt they had to clarify the ruling with a bill, setting the stage for AB 5. Gonzalez introduced the legislation in December 2018, setting off months of ferocious lobbying by companies seeking a carve out from the Dynamex ruling and protests by gig workers as tech companies cashed in millions through initial public offerings

Uber and Lyft floated their own plan, one that set a minimum wage and mileage reimbursement rate. When the rideshare companies did not succeed in becoming an exception to the ABC test, they turned to the ballot box.

“We’re not convinced [the drivers] have to be reclassified,” says Stacey Wells, a spokesperson for the Protect App-Based Drivers and Services coalition behind the 2020 measure. “For so many of these drivers and delivery workers, it’s all about flexibility.”

The rideshare companies say AB 5 would take that flexibility away and “potentially” force the drivers into shifts and mandated hours. So the ballot measure would define app-based drivers as independent contractors, not employees, and guarantee payment that’s 120 percent of minimum wage, or $18.71 an hour in San Francisco. It would also generate a stipend for healthcare based on hours worked, and reimburse 30 cents per mile. Uber and Lyft wouldn’t have to pay for things like benefits or actual health insurance, however. 

Akamine Kiarie lives in Sacramento and drives in the Bay Area, mostly 20 to 30 hours a week on the weekends to support himself through school. He became active for the measure after seeing an email from Lyft warning of changes and is part of the 66 percent of drivers who want to keep his independent contractor status, according to a survey done by The Rideshare Guy. (It also found that just 48 percent of drivers are happy with Uber, that they make an average of $13.67 an hour after expenses, and that 68 percent quit after six months.)

“The flexibility is the main reason why I got into this line,” Kiarie, an immigrant from Kenya, tells SF Weekly. “If [Lyft] figures most of the demand is rush hour, which is the morning block and evening block, they might allocate those times to drivers like a cab.” 

When asked what he was told would change, he says, “We haven’t had a deep conversation into that” but believes that the measure is a better deal for drivers like him.

Math paints a different picture. 

The minimum wage floor only accounts for the time workers are actually driving or delivering, and mileage reimbursement is just over half of the 58-cent standard set by the International Revenue Service to account for wear and tear on the car.

An analysis by the UC Berkeley Labor Center found that the measure only guarantees $5.64 an hour when accounting for the roughly 33 percent of work time drivers spend in between trips. Essentially, adopting the proposed ballot measure would carve a new minimum wage standard that doesn’t pay workers for time on the job that is essential to performing the job but that doesn’t earn the employer revenue. It paints a vague picture of app-based companies reigning themselves in while saving costs on benefits and payroll taxes that could increase labor costs 20 to 30 percent under the new classifications.

Jeff Perry is also a driver living in Sacramento but already finds it inflexible to work around peak traffic times. He works about 50 to 60 hours a week, mostly for Uber but also some Amazon Flex and Lyft in San Francisco to support himself and his two kids. 

“To live slightly above the poverty level, I work my ass off and it’s not right,” Perry says. “It didn’t use to be that way. There’s no reason for this other than straight-up greed.”

It’s clear to him that nothing will change come Jan. 1 so his hope is that other states start enacting similar laws to hold the rideshare giants’ feet to the fire. He compares Uber and Lyft writing the measure to a “fox engineering the henhouse” and says he’ll make even less than he does now under it.

Uber and Lyft are banking on this measure, or the pressure on legislators that comes with a costly campaign like this, to ride out changes come 2020 — a risk they’ve demonstrated they’re more than willing to take, Perry says. It’s also a move Lauren Casey from Gig Workers Rising called a “false choice and a fear tactic.”

“It’s cheaper for them to screw me than it is for them to pay me,” Perry says. “If they make a $1 billion off shorting drivers and they get hit with a $1 million fine, they still come out on top. This is the math they’re working off of.”

Not all companies are willing to take that risk, instead going above and beyond to eliminate liability.

City Attorney Dennis Herrera has the power to go after companies who violate AB 5. (Photo by Kevin N. Hume)

“As soon as [AB 5] came down, employers needed to reexamine whether people qualify as independent contractors under that test,” says Jeff Polsky, a labor attorney and partner at San Francisco’s Fox Rothschild. “The problem is there’s so much variation in our economy that some businesses don’t fit neatly within the exceptions.”

Polsky has been helping clients, who he declined to name, figure out what they have to do before January. The ruling and legislation present “very dramatic” changes to labor practices, he says.

For media companies that use freelancers, that’s meant scrambling to comply with the annual submission cap of 35 pieces of work. Any more than that, and AB 5 says the company has to designate the freelancer as an employee, part-time or otherwise. 

Thirty-five submissions is a number many freelancers, especially those in digital media, may surpass in a month. Weekly columnists, like SF Weekly’s own Zack Ruskin, will see those recurring gigs and income reduced. Other journalists have been picked up as full-time workers after Dynamex, but at rarities like the well-resourced, newly-unionized Los Angeles Times

Longtime freelancer Randy Dotinga, who sits on the board of the American Society of Journalists and Authors, sees that Gonzalez is worried about exploitation as outlets have been known to fire full-time staff and replace them with freelancers. But California freelancers already feel disadvantaged as companies act in fear of working with them, despite a possible business-to-business exemption.

“The law is a real existential threat to freelancers of all types,” says Dotinga, who noted that transcription service Rev has already blacklisted Californians. “Our fear is that even if we do qualify as a business, our clients aren’t going to want to hire us because they don’t want to take the risk. They just don’t want to deal with it.” 

Since the law was passed, some California freelancers have gathered in a private Facebook group that has already surpassed 700 members working to undo the issue. Dotinga has remained involved with Gonzalez’s office in an attempt to earn freelancers a full exemption. 

Veena Dubal, a UC Hastings professor, reminds worried freelancers that while the cap could be reconsidered, AB 5 provided exemptions where there were none under Dynamex. Another symptom of this crackdown, she adds, is caused by misinformation from attorneys who don’t specialize in employment law but have their clients avoid all liability.

“They’re approaching it with hyper-precaution,” Dubal says. “I do think there are really exciting things that could happen from this and it’s frustrating to me…I put the fault on these attorneys who don’t know what they’re doing. They’re impacting people’s livelihoods.”

One of the solutions could be for freelancers to form a cooperative that could fall under the business-to-business exemption while adding protections. The Pacific Media Workers Guild has a freelancers unit that provides health insurance discounts and helps workers receive payment but it’s unclear if it would fit this proposed mold. A representative did not respond by press time.

But AB 5 doesn’t solve the issue of lack of enforcement of current labor laws, which are already constantly broken. It’s down to the age-old matter of workers knowing their rights, having the wherewithal to fight for them, and for authorities to hand down consequences for violations. 

“The laws are enforcement-oriented,” Dubal says. “If you’re working with workers who are fine with the way things are then fine, you’re good. There’s nothing that’s going to change overnight unless there’s political will.”

The California Labor Commissioner doesn’t have enough resources to pursue all cases, Dubal adds, but local city attorneys are empowered to go after bad actors under AB 5.  Workers can report to local prosecutors, who have taken up labor enforcement time and again.

“Ensuring workers are treated fairly is one of the trademarks of this office,” said City Attorney Dennis Herrera upon AB 5’s passage. “City attorneys, district attorneys, and other local prosecutors are a force multiplier when it comes to protecting workers and consumers.”

Once AB 5 was passed, it was already known that more clarifying legislation would have to come, particularly for the music industry that went unaddressed. But Gonzalez says she would be watching to see how the rollout goes before proposing changes to already impacted industries, while continuing to hear concerns that have poured out since AB 5’s passage.

“We’re going to have to balance, as we move forward, folks who want a career and who have suffered from misclassification for many years because it was allowed,” Gonzalez says. “At some point we’re going to have to reach out and find a national standard. If California is seen as a one-off, we don’t want to put California remote workers in a bad situation.”

A New Jersey state representative introduced legislation in November that also calls for a three-part test, and more states are expected to follow. Gig economy companies, on the other hand, wouldn’t be opposed to legislation that solves the issue for them.

“We haven’t written that off,” Wells says of foregoing the measure if the political winds blow their way. “Barring a legislative solution that everybody can endorse, we’re ready to go to the ballot box.”

And there comes the rub. Companies like Uber and Lyft have the investor money behind them for lobbyists and ballot measures. Even if they get their way, it leaves behind workers struggling to adjust. As for freelancers like Beale, he’s already preparing to make up for lost income from what would have been a regular client.

“I might just have to take whatever work I can find outside journalism,” Beale says.

Ida Mojadad is a reporter for SF Weekly. You can reach her at imojadad@sfweekly.com.

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