Golden State Today

A California law intended to protect freelance workers from getting hired as independent contractors and being treated like full-time employees without the benefits and pay level that could otherwise come with employee status has not had the effect that legislators expected. 

Instead, California-based freelance workers and independent contractors have lost job opportunities and income, according to a business columnist.

The law went into effect on Jan. 1. On May 26 presidential candidate and former Vice President Joe Biden voiced his support for the measure. In a tweet he wrote: “Last year California passed #AB5, affording gig workers protections and benefits like a minimum wage and overtime pay. Now gig economy giants are trying to gut the law and exempt their workers. It’s unacceptable. I urge Californians to vote no on the initiative this November.”

California is not the only state trying to put matters like this into law. In New Jersey similar legislation stalled, and it also failed in New York. 

“When AB 5 took effect in California on Jan. 1, we didn’t see hundreds of companies convert independent contractors into employees," wrote Kim Kavin in a column for Reason.com. "Instead, thousands of independent contractors lost work they loved, sometimes ending up without any income at all.” 

In many cases, those working as independent contractors prefer it the old way, Kavin said.

A July 2019 report from researchers from the Internal Revenue Services, the Treasury Department, the University of Michigan and New York University focused on this section of the U.S. workforce and found that the argument that independent contractors are being exploited is flawed.

The report stated, in part, “The biggest chunk of self-employed people is in the top quartile of earnings, while the fastest-growing segment of self-employed people is in the bottom quartile. The new interpretation of the ABC test can't tell the difference between the bottom-rung Uber driver and a six-figure bandleader, even though they are orders of magnitude difference when it comes to financial insecurity and potential exploitation. Laws devised to protect one group could be disastrous for the other, not to mention many income levels in between.”

The ABC test has three prongs that includes these elements, according to Fisher Phillips, a California law firm. A, the worker is free from the control and direction of the hiring entity in connection with performance of the work, both under the contract for the performance of the work and in fact. B, the worker performs work outside the usual course of the hiring entity’s business. And C, the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.