In an unexpected twist, a spate of new legislation that claims to stop the exploitation of freelance workers is causing a backlash from some of the contractors it’s designed to protect.
California’s AB 5 is among the most controversial. The law, which went into effect Jan. 1, spells out standards that must be met to determine if workers are employees entitled to benefits and other protections, or contractors without those safety nets.
The law’s arrival comes as the U.S. increasingly relies on a freelance workforce, with businesses able to save up to 30% or more in costs using independent contractors rather than employees, according to the National Employment Law Project.
But the law and bills circulating in other states have met resistance from companies and raised worries among some freelancers who fear work opportunities may dry up.
California’s legislation has sparked at least three lawsuits, including one by ride share company Uber, and another that led a federal judge to issue a temporary restraining order exempting truck drivers from the law the day before it took effect.
It also influenced a decision by the company Vox Media to eliminate 200 freelance positions and has spurred Uber and rival Lyft to launch a multimillion-dollar campaign to place an alternative measure on the ballot in November 2020.
Other states are pushing for legislation similar to California’s. One of those bills, in New Jersey, has united a coalition of independent artists, writers and other professionals who argue that its passage would lead employers to simply fire freelancers rather than make them permanent staffers or try to meet strict guidelines that prove they are working independently.
The debate highlights the growing pains of the gig economy, as the bills divide workers into competing interests: those who say laws are needed to stop employers from skirting tax laws and exploiting the people they hire and others who fear they will end up unemployed.
One of the worried freelancers is Kim Kavin, who says she has been able to make a good living over the last 16 years working independently as a writer and editor.
She’s concerned the proposed New Jersey law could make her life much worse.
“There are absolutely companies calling people independent contractors when they should pay them and give benefits,’’ says Kavin, who founded a Facebook group focused on stopping the law, which would codify criteria defining who is a freelancer. “But … they have to write legislation that protects those of us who want to be independent.”http://www.usatoday.com/”
One-third of Americans work in the gig economy
In 2017, the most recent year available, roughly 10% of workers were in “alternative employment arrangements,”http://www.usatoday.com/” which included being an independent contractor or on call, according to the Bureau of Labor Statistics. Roughly one-third of Americans perform some type of gig work – such as being a rideshare driver – over the course of a year, according to the company Staffing Industry Analysts.
States have long had rules defining who is an employee versus a freelancer, particularly to sort out who qualifies for benefits like unemployment insurance and workers’ compensation. Federal laws also contain definitions of who is, and who isn’t, an employee.
“It is not new,”http://www.usatoday.com/” Rebecca Smith, director of work structures at the National Employment Law Project, said of such laws. “But what is new is the degree of organizing among workers, especially those in the gig economy. Workers across the country are joining together, standing up, and demanding that businesses stop gaming the system. And legislators are listening.”http://www.usatoday.com/”
Last year, at least 15 states introduced bills related to worker classification, says Josh Cunningham, manager of the employment, labor, and retirement program for the National Conference of State Legislatures. Of those, bills in Delaware, Illinois and Nevada, as well as California, were signed into law.
Those who support the new laws say some are merely cementing or spelling out rules previously established by labor officials or the courts. The goal is to prevent employers from misclassifying workers so they can avoid paying payroll taxes and guaranteeing them a minimum wage, workers’ compensation and other protections.
Backers of California’s AB 5 say it is meant to clarify competing criteria for what defines a worker as an independent contractor.
Freelance writers, for instance, who write 35 or fewer pieces for the same publication in a year, would be defined as independent, according to an older statewide test. Most truckers, however, must meet the ‘ABC’ criteria established by a 2018 California Supreme Court decision to have that status.
Independent workers may be more vulnerable than employees, not entitled to certain wages, insurance and other benefits. But many freelancers say they prefer the flexibility of not being tied to a single employer, while industries like trucking are built around a network of freestanding subcontractors.
Among those who support the California bill is Democratic presidential contender Sen. Elizabeth Warren, who says it mirrors a similar law that’s long been in effect in her home state of Massachusetts.
“Their methods have changed over the years, but companies’ drive to cut costs and boost profits at the expense of workers’ well being has not,”http://www.usatoday.com/” Warren wrote in a piece published by the Sacramento Bee in August. “AB 5 is effective because it is straightforward and simple: It makes full “employee” status the default under state law, which will automatically protect millions of workers.”http://www.usatoday.com/”
Lost work an unexpected consequence
But in the wake of the bill’s passage, some freelance work is disappearing. Vox Media will create 20 new full-time positions, while eliminating 200 freelance slots that covered California sports teams, saying that sticking to the law’s limits on freelance content will be difficult.
Concerns that other employers will take a similar stance helped spur the National Press Photographers Association and the American Society of Journalists and Authors to file a lawsuit in federal court last month.
Their suit contends that while the law creates exemptions for many industries, it does not do that for journalists and photographers, and the restrictions on their ability to be deemed freelancers are unconstitutional.
“They’re not going to force any news organization to hire more staff,”http://www.usatoday.com/” Mickey Osterreicher, general counsel for the National Press Photographers Association, said of the legislation. “This will just ultimately have the effect of people who were earning an income having their income reduced or eliminated completely.”http://www.usatoday.com/”
In response to another suit, filed by the California Trucking Association, U.S. District Judge Roger Benitez issued a temporary restraining order on New Year’s Eve exempting truck drivers from the new legislation.
But California Assemblywoman Lorena Gonzalez, (Dem -San Diego), sponsor of AB 5, says such legal efforts are aimed at denying drivers and others the protections they deserve.
“For decades, trucking companies have profited from misclassifying drivers as independent contractors, taking away rights such as meal and rest periods and fair pay,”http://www.usatoday.com/” she says. “We will continue to fight them at all levels to return jobs in the trucking industry to good, middle-class careers.”
Meanwhile Uber and Postmates have headed to court to fight the new legislation.
“They passed AB 5 using a biased and overtly political process that ignored the voices of the workers most affected by the law and granted preferential treatment to an arbitrary group of industries,”http://www.usatoday.com/” Uber said in a statement about the litigation it filed last Tuesday. “We are joining a growing group of companies and individuals suing to ensure that all workers are equally protected under the law and can freely choose the way they want to work.”
Uber has also been pushing a ballot measure it says would create “a third option’’ that allows drivers to remain independent while also having access to some benefits.
But rideshare driver Edan Alva supports AB 5.
Though he has driven for Lyft for about five years, the company and several other ridesharing services became his primary sources of income after he lost his full-time job a year and a half ago as a manager for a company that assisted with issues and crises for businesses.
The pay from companies like Uber and Lyft has shrunk dramatically, Alva says, even as the price of fuel and other costs have risen. And he lacks adequate health care coverage for himself and his 17-year-old son.
“You are getting paid what they decide that you get paid, and you are doing the work they’re telling you to do, exactly the way they tell you to do it,’’ Alva, who lives in Alameda, California, says of Lyft and Uber. That means he and other drivers “should have…the protections an employee would have. The coverage of expenses, insurances paid by the company, (and) a minimum wage.”http://www.usatoday.com/”
New Jersey not the same as California
New Jersey State Sen. Stephen Sweeney, a Democrat who sponsored that state’s proposed law, says his legislation is not the same as California’s.
“There has been a good amount of misunderstanding and misinformation about the bill,”http://www.usatoday.com/” he says. “All that this legislation would do is codify into law existing regulations that protect the rights of workers against misclassification so the regulations can’t be ignored or discarded by future administrations… Misclassification not only hurts workers. It hurts law-abiding businesses and workers who play by the rules.”
Freelance writers in New Jersey will be able to maintain that designation, Sweeney says, as should workers in other professions who up to now have operated independently.
But Kavin is doubtful. One publication she has written for has already informed a peer that it will cut back on freelancers if the New Jersey bill is passed.
“Two thousand dollars just got taken out of my future earnings because of the threat of this legislation,”http://www.usatoday.com/” she says, noting that is how much the publication pays per article. “They need to write the law in a way that solves the worker misclassification problem without destroying the careers of people like me.’’
Follow Charisse Jones on Twitter @charissejones