Three Cheers For Two Lawmakers Fighting Today To Save Millions Of Entrepreneurs

Tuesday, January 28, 2020

State Assembly members Kevin Kiley and Melissa Melendez are the first California lawmakers to try to do something about California’s awful new law, Assembly Bill 5 (AB 5). This new law may eliminate more than one million independent contractors in the state. Representatives Kiley and Melendez will be co-sponsoring an amendment to the state’s constitution that would overturn AB 5. Kiley and Melendez are organizing a protest of AB 5 at the state capital today.

While a constitutional amendment is an obvious long shot, I am hopeful that the efforts of Kiley and Melendez, and the rapidly growing outrage among the state’s independent contractors, will ultimately force a revision of the law.

Like any political leadership that wants to run things their way, and with no questions asked, the state thus far is doubling down on its efforts to preserve this destructive law. Governor Gavin Newsom’s 2021 budget includes roughly $20 million for enforcement of AB 5, including $3.5 million for Employment Development Department staff to be able to determine whether a contractor passes the extraordinarily stringent test for being considered an independent contractor.

The state may as well save the $3.5 million of taxpayer money. Except for some politically important, exempted occupations, including physicians, dentists, real estate and insurance agents, very few others will pass. This is because an individual “must be free from the control and direction of the hiring company” to be considered an independent contractor under the new law.

That requirement alone should just about take care of eliminating non-exempted independent contractors in the state. Now, suppose you want to tell your independent landscaper to cut the grass a bit shorter than normal? According to the law, no can do. Or tell your housekeeper to vacuum the living room floor? No can do. Or tell your housepainter what color you want your front gate? No can do. You get the picture.

The author of the bill, Representative Lorena Gonzalez, made not one but several questionable statements in responding to an avalanche of criticism of the bill.  She has told independent contractors that their self-employment opportunities are poor, she has remarked that stories of people who claim they are being hurt by the law are overblown, and she even managed to swear on twitter to one Californian who complained about losing his livelihood. Now that is quite the political trifecta.  

Gonzalez began by saying in an interview that the affected independent contractor jobs “are not good jobs to be begin with.” And Gonzalez seems to think those who have been harmed by the bill are grossly mistaken. A woman who works as a Greek translation independent contractor wrote to Gonzalez as follows:

“You’re penalizing me? For being a taxpayer who wants to work and does not want to be on welfare? I don’t want to be on that. I love this country, it (AB 5) makes no sense to me.”

Gonzalez replied:

“I’m sorry and I feel that she does feel that way. But I don’t think it is true.”

AB 5 should never have seen the light of day, not just because it is a complete abrogation of individual freedom, but because people really enjoy being independent contractors. You would have thought that her staff would have done some research on job satisfaction among independent contractors to determine if self-employment was indeed a “problem”.  If they had, they would have found a survey conducted by the Bureau of Labor Statistics, which showed that about 80 percent of independent contractors prefer working for themselves.  

Not surprisingly, Californians began losing work even before the law took effect. Freelancers, including journalists, artists, cartoonists, and photographers quickly lost work as their hiring partners simply increased hiring freelancers in other states that do not punish those who hire independent contractors. Under AB 5, journalists can write only 35 stories annually if they wish to remain an independent contractor.

And to all those politicians who guessed that independent contractors would simply get picked up as employees, well, guess again. Many businesses, including most publications where freelancers are hired extensively, struggle to make their existing payrolls. There is no way that they will seamlessly transition existing, relatively low-cost freelancers into high cost employees.

But this was news to Gonzalez, who made additional mistakes when responding to a writer who lost her freelancer job by saying “this is not all bad”, and by claiming that those freelancers who could not get hired as an employee simply “didn’t want a job.”

Gonzalez should understand that there was never any way most freelancers were going to get picked up as regular employees. Gonzalez’s failure to understand the economic forces driving freelancer employment relationships is very concerning.

As an economic policy maker, she must understand the economic consequences of the laws that she writes. It appears she completely missed the very significant and negative impact of this law, and many Californians are suffering as a result.

AB 5 represents the absolute worst in economic policymaking and it also illustrates what happens when agenda-driven legislators get power. They try to run other people’s lives, telling them what they can and can’t do.  And by trying to run other people’s lives, legislators seriously damage those lives. According to the twitter feeds cited above, those lost livelihoods are just a bit of collateral damage in the process of turning California into the most “progressive” state in the union.

Here’s to hoping that other state lawmakers will join Representatives Kiley and Melendez and reverse course on this ruinous law before more lives are damaged. As much of the rest of the world fights for more freedom from government overstep, California continues to go in the opposite direction.  

The policy making vision of freedom, opportunity, and public investments that once made California so great is gone. But it is not too late to bring it back. All it takes is for more lawmakers to embrace the political courage and foresight being demonstrated by Representatives Kiley and Melendez today.