The Biden administration is moving to reclassify many independent contractors as employees. That will cause firms that use such contractors to fire some of them, and restrict many others’ flexibility or autonomy. Independent contractors sometimes don’t like how they are treated by companies, but most of them don’t want to become employees, because that doesn’t solve their problems, it just creates new ones. But forcing them to become employees and work in an office makes them easier to unionize, which is a key goal of the Biden administration.
An MSNBC article explains:
The Department of Labor on Tuesday proposed new guidelines that happen to align with what union labor activists have long demanded….the new rule…would impose on businesses stricter definitions of what constitutes an employee…Critics insist that the practical effect will be to throttle the sharing economy into submission…. as The New York Times reports, “many employers and regulators in other jurisdictions are likely to consider the department’s interpretation when making decisions about worker classification, and many judges are likely to use it as a guide.”…The rules are a direct threat to “gig companies and other service providers” who rely on contract labor. The Labor Department’s new rule is akin to what the Biden administration and its allies in Congress tried (and failed) to pass into law with the Protect the Right to Organize (PRO) Act….the new rules are likely to impose new costs on companies that depend upon contract labor — costs that will be passed on to you, the consumer. The “PRO Act” was modeled after a 2019 California law, AB5, which was supposed to remedy the supposed indignities endured by participants in the so-called “gig economy.” It was hailed as a “victory for workers,” but the workers themselves didn’t seem to appreciate the reform much.
The law’s practical effect was to make freelance labor impractical. Overnight, independent writers, graphic designers, photographers, journalists and content producers found themselves unemployable. Local papers had to contract out of state to get the scoop on what was happening just next door. Music festivals ceased operations and performing arts groups went on hiatus.
The Biden administration’s proposal is modeled on a California state law that is so problematic, and has eliminated so many job opportunities, that it later had to be amended to include many exemptions to limit its damage. As an article in The Hill explains:
Three years ago this month, California Gov. Gavin Newsom signed California Assembly Bill 5 (AB5) into law, essentially outlawing freelance journalism and most other independent contracting. Opponents of the bill warned the law would devastate the longstanding careers of many independent businesspeople in the Golden State. Three years later, it’s clear the critics had it right: AB5 has proven to be among the most ill-conceived state labor policies in recent memory.
If AB5’s restrictions were limited to California, that would be bad enough. But the Biden administration appears determined to bring these destructive labor restrictions to the national stage in the form of the Protecting the Right to Organize Act (PRO Act). Policymakers should pay heed to the damage AB5 has wrought in California and stop this disastrous policy in its tracks.
AB5 created a three-part “ABC” test used to determine whether a worker is an independent contractor or employee. The key provision of the test is that anyone performing work within the “usual course of the hiring entity’s business” must be classified as an employee, rather than a contractor.
The outcome was predictable: Many businesses and nonprofit enterprises that relied on independent contractors stopped using those workers — both because workers who had built self-sufficient careers did not want to trade the freedom of freelance work for the false benefits of employment, and because many companies couldn’t afford to convert them to full-time employees.
Countless self-employed Californians suddenly lost work opportunities and faced steeply declining incomes. Making matters worse, AB5 took effect in January 2020, mere weeks before Newsom locked down the state in response to COVID-19. Just when Californians most needed the freedom and flexibility that independent contracting provides, they were frozen out of the labor market.
AB5’s opponents — an array of workers and groups who crossed partisan and ideological boundaries — begged the legislature to reconsider upending California’s freelance economy. Lawmakers handed out exemptions to the politically connected; union leaders were put in charge of deciding which professions got an exemption. Mostly, lawmakers ignored workers’ concerns. They passed the bill with dozens of exemptions, and when the dire consequence everyone predicted came to pass, the legislature added dozens more the following session.
AB5 is so cut through with exemptions, it is defined more by what it doesn’t apply to than what it does cover. The ABC test is a single section containing just 325 words. The dozens of exemptions to the test span 10 sections and include 6,902 words. There are now more than 75 exemptions to a law that was supposed to define labor rules for the entire state.
Due to AB 5, Vox Media cut 200 freelancers, according to the New York Times. AB 5 especially harmed disabled people and parents of young children who find it difficult to leave home for a 9-to-5 job. At the progressive website Daily Kos, Markos Moulitsas notes that the law has “hugely impacted” disabled workers. Female business owners are “reeling,” says Elaine Pofeldt at Forbes.
Vivek Saxena writes:
“This piece of legislation has left thousands of state residents, including numerous single mothers and individuals with disabilities, without a source of income….While it was originally designed to target Uber and Lyft, both of which rely heavily on freelancers for their work model, it’s affected nearly every industry, including those dominated by women. ‘[I]ndependent contractors are now suffering, particularly women who are stay-at-home moms and chose the independent contracting lifestyle because they needed the flexibility,” Evie magazine reported after the bill went into effect in January. ‘Many women need the freedom of being an independent contractor because they have a loved one they need to care for at home or they have a disability.’”
“Because of AB5, companies that used to provide these women with work must now either hire them as full-time employees (and thus pay bundles in added overhead costs), drastically reduce their workload (as an example, the law prohibits freelance writers from producing more than 35 pieces for a single client per year) or just hire contractors from other states.”
One worker harmed by AB 5 noted, “‘I survived cancer and had 36 surgeries while raising kids, and still live with a traumatic brain injury. I can’t work a regular job. But with the support of my family, I was finally chasing my dreams as a writer, poet & Voice Over actor.” Then, along came AB 5 to wipe out those dreams and leave her without work.
As Twitchy observes, the idea behind AB 5 “was to force companies to hire on as full-time employees all of the people they’d been paying as independent contractors, completely ignoring the fact that a lot of people” don’t want a 9-to-5 job with one employer, “but rather flexible hours and independence.” Many people prefer working from home, or having multiple different clients or kinds of work.
But AB 5 didn’t work as predicted. It led mostly to firing, instead of full-time hires. California companies responded to the law not by turning contractors into employees, but by getting rid of them. Companies outside California reacted to the law by refusing to hire California residents, or by firing their California contractors and hiring non-California replacements. For example, the New York Times hired “a contractor to write about California real estate, but because of AB5,” it ruled out hiring “anyone in California,” noted journalist Emma Gallegos. Similarly, Patch Media “placed an ad looking for reporters to cover stories about California, so long as the reporters don’t actually live in California.” Writer Rebecca Lawson wrote that “As with many of my colleagues today, because I live in California, I was just told that I can no longer hold a paid position with SB Nation.” Even AB 5’s sponsor admitted she’s “sure some legit freelancers lost substantial income.”
Filmwriter Tyler Ruggeri says that “AB5 is killing freelance income across California – a cruel, barely thought out, hastily signed law, and devastating for gig workers everywhere.”
Those harmed by AB 5 included many in the media and entertainment industries, whose objections to the bill were brushed aside by Joe Biden. As the producer and director Heather Provost said to Joe Biden, “please don’t support this. PLEASE. It’s hurting artists of all kinds terribly…a huge section of your supporters!” The progressive freelancer Jen Hubley Luckwaldt told Biden, “Don’t put independent contractors out of business. We’re not exploited workers. We’re business owners.”
AB 5 created severe problems for performing artists. As a filmmaker noted, “Countless music festivals, operas, and community theatre productions are being cancelled due to #AB5.” The law apparently required musicians to become employees to perform even some single performances, such as music festivals, unless they incorporate themselves. Many independent truckers have also said the law would put them out of business.