AB 5 homes in on many of the industries targeted by labor: gig workers; big-rig, Amazon and other truck drivers; and low-wage services ranging from janitors to home health aides. Unlicensed nail technicians, language interpreters, musicians, strippers and even rabbis could be impacted.
However, multiple professions received "carve-outs." Under the final version of the bill, doctors, dentists, lawyers, architects, engineers, accountants, insurance agents, real estate agents, hair stylists and barbers received exemptions, as did travel agents, graphics designers and grant writers. So too are licensed cosmetologists and barbers that set their own rates and schedules.
Commercial fisherman are also exempt until 2023. Tow truck drivers affiliated with the American Automobile Association got a carve-out as well. And freelance writers and photographers can continue to work as contractors provided they don’t submit more than 35 submissions to an outlet in a year.
California’s pushback against the gig economy intensifies pressure on Silicon Valley flagships like Lyft and Uber, companies that were already trading below their IPO share prices amid investor concerns about the difficulty they’ve had turning a profit. Uber cut 400 people from its marketing team in July, reported a quarterly loss of $5.2 billion in August and sent layoff notices to another 400-plus workers this week.
On Wednesday, Uber’s chief legal officer, Tony West, said in a press call that the company plans to fight the tougher employment test once AB 5 takes effect next year. “We still may pass the test,” he said. “We believe we can pass the harder test.”
But concerns around basic worker protections also have become pressing in California, where one worker in three earns less than $15 an hour and the poverty rate hovers above 18% when cost of living is taken into account.
Aside from the philosophical questions around AB 5, the state estimates it loses about $7 billion a year in payroll taxes due to worker misclassification, revenue that could be supporting schools, roads and other public services. Supporters of the bill argue that by avoiding unemployment insurance taxes and workers’ compensation premiums, businesses shift the burden to the state — and its taxpayers — when workers get laid off, get sick or get injured on the job.
Opponents warned that the bill would invite trial lawyers to file frivolous lawsuits against thousands of California businesses and called the bill a blatant power grab by big labor.
“This bill is the union caucus’ main event of the year,” said Sen. Jeff Stone, R-Temecula, who held up an exemption request form, obtained by CalMatters, that labor groups had been presenting to industry advocates seeking a carve-out.
Industries as varied as trucking and health care also pushed back, arguing that the legislation would rewrite the rules for independent workers whose status has worked for them for decades.
“AB 5 does not take into account the more than 70,000 California truckers who have built their business around the independent owner-operator model, invested hundreds of thousands of dollars in their trucks and have made the decision to run their own businesses,” Shawn Yadon, CEO of the California Trucking Association, said before the bill passed.
Hospitals, too, are worried the bill will not only cause confusion but may have the unintended consequence of delaying patient services. Gail Blanchard-Saiger, vice president of labor and employment at the California Hospital Association, said although doctors, psychologists and podiatrists are exempt from AB 5 and hospitals employ more than 90% of their workforce, many medical professionals such as physical therapists and certified registered nurse anesthetists are contracted at small and rural hospitals where volume is low.
“The impact on the hospital for these health professionals is probably a delay in services and in particular rural communities maybe a reduction in services,” said Blanchard-Saiger.
Among the other health professionals not exempt under AB 5: occupational therapist, speech therapist, optometrist, nurse practitioner, physician assistant, radiation therapist, licensed professional clinical counselor, marriage and family therapist, licensed clinical social workers, respiratory therapists, audiology.
In the final weeks of the legislative session, gig companies unsuccessfully campaigned heavily for a new, first-in-the-nation framework that would allow their workers to remain independent while offering a wage floor and some kind of bargaining tool. And on Tuesday, Newsom told The Wall Street Journal that he is still talking to Lyft and Uber “and regardless of what happens with AB 5, I am committed, at least, to continuing those negotiations.”
The San Francisco Chronicle reported potential legislation calling for a new category of workers — to be known as “network drivers” — to cover rideshare and delivery service drivers, guaranteeing at least 1.27 times minimum wage, reimbursement of 30 cents a mile and contributing 4% to a Drivers Benefits Fund to purchase workers compensation insurance and other benefits.
Uber and Lyft say the codification of the Dynamex decision — that established a three-part test for certifying contractors — will force them to fundamentally change their hiring practices. It likely means the rideshare industry will take on fewer drivers and assign shifts, giving drivers less flexibility.
Labor representatives called it a scare tactic and said nothing prevents companies from maintaining flexibility for workers.
During debate before the Senate vote, Republicans sought to include hostile amendments aimed at expanding exemptions for newspapers, physical therapists, the timber industry and more. Each was tabled by Democrats who control both houses of the Legislature.
Gonzalez, however, did agree to exempt the newspaper industry from converting carriers for one year.
“While I personally disagree with this delay, I’m willing to allow the newspaper industry the additional year to comply if it means those delivery drivers and nearly a million other misclassified workers are provided the minimum wage, benefits and workplace rights of Assembly Bill 5,” she said.
A few industries did get the exemption they sought, such as builders and contractors. Peter Tateishi, CEO of the Associated General Contractors of California, said his organization ended up backing the bill after being allowed to contract with other contractors under a business-to-business carve-out.
