California is drastically underrepresented in the US Government due to the systemic over representation of rural states in the Senate. North Dakota has the same number of senators as California. Which means for every person a Senator in North Dakota represents, a Senator in California represents more than 50. In order to combat this, California thinks that passing state laws will inspire other progressive states to pass similar laws normalizing progressive ideas. Over the last 15 years we have seen this happen with Marijuana and auto emissions. In a perfect world, the US Government would be more in-step with what the majority of her citizens want, but here we are.
In that vein, California’s state government passed and signed Assembly Bill 5 this week. It changes the rules of who can be considered an independent contractor. It adds an ABC test as follows:
- A: that the worker is free from direction and control in connection with the performance of work;
- B: that the worker performs work outside the “usual course” of the hiring entity’s business; and
- C: that the worker is customarily engaged in an “independently established trade, occupation, or business of the same nature as that inviting the work performed”
Everyone knows the intended targets of this legislation are Uber and Lyft (and all the other gig companies). I worked for Taxi Magic, a company that was trying to color inside the lines and play nice with existing ground transportation companies. I only say that to establish my bona fides when I try to point out some of the flaws of this bill.
The gig economy has forever shaken up the status quo on the backs of people who are willing to work for less than minimum wage. When I think about this change, it is easy to ignore individual workers and make sweeping generalizations. People who are willing to be exploited, knowingly or otherwise, don’t do it because they have a lot of options. They believe they are making a rational choice. I fully support the role of government to step in and stop people from being exploited. The problem is, this law doesn’t just affect people working for gig economy companies.
If you look at the B test it conclusively excludes staff augmentation. Staff augmentation is where a company hires a freelancer on a weekly or monthly basis to be a part of their team because they are unsure how much capacity they need or they have a hard deadline they can’t meet without short-term help. I can only speak to the engineering field and my own experiences, but people who are hired based in this manner are not being exploited in a way the government can help. One can normally charge a fair market rate that pays as well or better than if you were full time. You are billing enough to afford health care. However, due to the nature of staff augmentation, you are literally doing the same thing as the rest of the team.
This happening in California means we are in for a super stupid proposition fight. California’s Constitution allows citizens to put a measure on the ballot to override the legislature. There are a number of pros and cons of this type of direct democracy that we don’t have time to discuss today. If I had to use a Facebook relationship status I would say “It’s complicated”. Uber, Lyft and Door Dash have already vowed to put 30 million dollars each toward passing a proposition to override this bill. So, I guess subscribe to ad-free youtube if you live in California?
The bill itself is a bandage on top of a broken employment system. I support California trying to protect workers, but this bill sweeps up too many people not being harmed. I am not a lawyer or policy maker so I don’t know how I would amend B exactly, but in its current form, it is too broad. Maybe adding an exclusion for people whose rates are X times the minimum wage would target people who are need protecting?