“Like the old Soviet Union you will be allowed to work only if government allows it—under their conditions, not yours.” ~Stephen Frank
Part ll of those hurt by AB 5.
Assemblywoman Lorena Gonzalez (D-San Diego) and Governor Gavin Newsom (D) are digging in as freelancers fight back against AB 5. On Friday, Jan. 10 Gonzalez appeared on KUSI in San Diego and made numerous false claims about workers in the gig economy not paying taxes or having benefits. The same day, Gov. Gavin Newsom allocated $20-million to target and investigate contractors, not in compliance with the law that took effect New Year’s Day.
California is estimated to have nearly two million residents who choose to work as an independent contractor, according to the 2018 U.S. Bureau of Labor Statistics Economic Release. Two million however is a conservative estimate because the report did not include the number of individuals who supplement their income with online platforms.
Gonzalez has angered not just thousands but possibly millions of voters. Self-proclaimed hard core Democrats have said this is the straw that broke the camels back.
A group of contractors met with Assemblyman David Chui (D) in San Francisco on Monday. Chui told contractor Emily Price and others that a repeal of AB-5 is unlikely but he is keeping a binder of people’s stories on how the bill is affecting them.
Meanwhile, rally’s are being planned up and down the state, freelancers and independent contractors are writing letters, and making phone calls to state representatives. Gonzalez however remains firm AB 5 and says the new law is best for the state.
AB 5 stems from the The Dynamex Operations West, Inc. v. Superior Court decision by the California Supreme Court in April 2018 that overturned three decades of California employment law that allowed individuals to work as independent contractors.
According to Imindependent.com, “This decision could upend how millions of Californians earn a living and nearly every industry due to its new restrictive ABC test. The ABC test is the first time in U.S. history that such a test has been imposed by a court, without legislative approval, with three independently disqualifying factors.“
Newsom who is pro-union like Gonzalez, said he will use part of the $20 million for training staff to allocate the ABC test and to allocate funding to investigate and hold hearings on compliance. A reporter from California Political Review compared Newsom’s tactics to the those of a communist regime.
“Like the old Soviet Union you will be allowed to work only if government allows it—under their conditions, not yours,” wrote Stephen Frank.
The terms of AB 5 are so murky that many companies are choosing to not work with anyone living in California.
One freelancer shared a letter they received with the California Globe. In order for the out-of-state company to work with them they needed to incorporate. Incorporation can cost the freelancers to pay more in taxes.
“This is about small businesses who are doing the right thing, they (employers and employees) pay the taxes, they pay into Medicare and Social Security, paid sick days, paid family leave, unemployment income,” said Gonzalez who wishes everyone would unionize.
Gonzalez said more than once that people who hire employees are doing the right thing and inferring that freelancing is wrong. It appeared Gonzalez was trying to make a case that contractors are tax dodgers.
“What if a photographer falls and hurts themselves? If they don’t have workers comp who pays for their medical care? The freelancers cost the state $8 billion a year because they don’t have workers comp,” said Gonzalez.
Carmen Taellez, an independent contractor wrote, “My liability insurance is about $300 a year and workers comp is between $500 to $800 per year.”
“I would like to see the evidence of that billions, really billions of dollars that we freelancers are costing the tax payers in medical care,” wrote Annabella Ferris Gomez an independent contractor who works as an interpreter.
California Globe reached out to Gonzalez to find out where she got her numbers of $8 billion dollars but she has not responded.
Many freelancers like Shawn Graham have full time jobs that provide their insurance, “I don’t need insurance for my freelance gig. I have it with my main job.”
Jessica Turner who works from home is a closed caption writer, “I home school my kids and attend college. I have insurance through my husbands’ work plan. It is less expensive to go that route. If I get hurt while typing at home at my desk I just go to the doctor. There is no expense to an employers or the taxpayer. Why would I want the hassle of workers comp?”
Contractors are questioning the lack of research Gonzalez, who is also an attorney, put into AB 5. A simple internet search leads to a variety of links to insurance and benefits they can pay into. Freelancers often prefer to use their own health insurance for on the job injuries instead of workers compensation and that could be doing the state a favor.
Gonzalez has said people would prefer to be employees. But a U.S. Department of Labor survey in 2017 found that 79.1 percent of independent contractors preferred alternative work arrangements. This is the most comprehensive survey of alternative work arrangements in the U.S. economy.
The state just completed its first audit of the California Division of Workers Compensation. The findings were dismal, showing a shortage of medical experts and doctors who were over billing and raising due process concerns among other concerns. In 2017-2018 the state audit showed there were only 2,800 medical evaluators and 100,000 new requests.
Gonzalez and Newsom however, want to increase the number of people signed up to use workers compensation in an already over burdened failing system of heath care insurance.
In an effort to entice voters to accept AB 5, Gonzalez said that the fee to incorporate this year will be waived. However, every year after that workers would have to fork over up to $800 in fees to the state and pay more in taxes. It appears AB 5 is designed to be profitable for the state and costly for the contractor.
Freelancers in California have the ability to opt in to the Employment Development Department and pay dues based on their income, to receive disability through the state, but often prefer to to use their own health insurance. The information on EDD can be found directly on the state website which contradicts Gonzalez’s statements about freelancers not being able to have similar benefits as employees and costing tax payers money.
According to the state website, “The EDD offers an optional Disability Insurance Elective Coverage (DIEC) program for employers and self-employed individuals who are not required to pay into State Disability Insurance (SDI) but want to be covered by Disability Insurance (DI) and Paid Family Leave (PFL). DIEC is funded through quarterly premiums and can protect you against partial loss of income when you are unable to work.“
The IRS as previously noted in the California Globe determines the independent contractor status. The EDD also uses the federal definition of a contractor and The IRS explains what an independent contractor is and is not:
The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax.
You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.
On Tuesday, January 28th a Rally to Repeal AB 5 on the North Steps of the California State Capitol will be held at 10:00 a.m. After the rally, attendees are encouraged to visit their representatives in the Capitol and let them know how AB-5 is affecting their livelihood.
Assemblyman Kevin Kiley welcomes anyone with questions or would like information to contact himself or their local State Legislator to schedule a meeting in advance. Kiley can reached through email or phone at Assemblymember.Kiley@assembly.ca.gov and 916-774-4430.
Kiley is working with Assemblywoman Melissa Melendez to make a change to the state’s constitution that will negate AB 5.