LAWSUITS MOUNT AGAINST NEW CALIFORNIA LABOR LAW, AB 5

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Judge issues injunction on behalf of independent truckers; freelance journalists and other gig worker groups also file legal challenges
 
By Miriam Raftery
 
January 6, 2020 (San Diego) – A new law making it harder for businesses to classify workers as independent contractors instead of employees took effect January 1st. Assemblywoman Lorena Gonzalez-Fletcher, the bill’s author, aims to provide more workers with benefits such as healthcare, unemployment insurance and the option to unionize. But a flurry of lawsuits are challenging the measure as unfair and constitutional.  

Independent workers across a wide range of industries ranging from freelance writers, musicians and artists to truckers, translators and hairdressers have voiced alarm, saying the law is costing them business, harming creativity and their economic bottom line. Though the law stemmed from efforts to force ride-sharing services such as Uber and Lyft to pay minimum wage and other benefits to its workers, the law is so broad as to impact a wide range of workers across a broad range of industries – many of whom wish to stay independent.
 
Several industries are challenging the measure in court and there is also the prospect of a ballot measure to limit or overturn the widely unpopular measure. The bill comes on the heels of a related Dynamex decision by the U.S. Supreme Court on another sweeping California-based law that many employers and workers were unaware of before news coverage of AB 5.  
 
On New Year’s Eve, a federal judge issued a temporary injunction to halt implementation of the new AB 5 law, but only for independent truckers in response to a suit filed by the California Trucking Association, Associated Press reports. U.S. District Judge Roger Benitez found truckers would be likely to suffer irreparable harm without the temporary injunction. He is considering a permanent injunction and indicated the truckers’ association will likely win its argument contending that the state law violates federal interstate commerce law. Many truckers have invested heavily in buying their own trucks and want to set their own hours.
 
Uber and Postmates, a food delivery app-based service, have filed their own suit along with two gig workers, Huffington Post reports. Their suit claims the law is unconstitutional and that their case is about plaintiffs defending “their fundamental liberty to pursue their chosen work as independent service providers and technology companies in the on-demand economy.” Voice of San Diego reports the suit accuses Gonzalez-Fletcher of “overt bias” and “political favors” in drafting the seemingly capricious law. 
 
The San Diego Assemblywoman, a Democrat and former executive director of the San Diego Imperial-Counties Labor Council, has been tone-deaf to critics, firing back against opponents of the new law, including many in her own party. ““Those who lose their jobs feel free to complain loudly,” she said, the New York Times reported. “But those who may benefit from the law by becoming employees, “think it’s not appropriate to be engaged in something that affects them, that they have a conflict.”
 
Perhaps the strongest case is one filed on behalf of freelance journalists and photographers by the American Society of Journalists and Authors and the National Press Photographers Association. Many freelance writers and photographers report losing substantial work due to publishers dropping all use of freelancers rather than invest the high cost of converting them to employees. Some out of state publishers are dropping use of all California freelancers due to AB 5.  Journalists argue that the law is an unconstitutional violation of the First Amendment protections guaranteeing freedom of the press and free speech. 
 
“We have no choice but to go to court to protect the rights of independent writers and freelance journalists as a whole,” said Milton C. Toby, JD, president of ASJA. “The stakes are too high, and we cannot stand by as our members and our colleagues face ill-conceived and potentially career-ending legislation.”
 
The law does have a hodge-podge of incongruous exemptions including industries that donate to support the Democratic party including lawyers as well as doctors, grant writers, and other seemingly unrelated fields. There are some partial exceptions; freelance writers and photographers can submit up to 35 submissions a year, but that’s impractical for many including weekly columnists who rely on reselling their works to many publications and would lose that right if forced to become employees – a potential violation of the copyright clause of the constitution, which grants creators the rights to their works and specifies that only Congress has the power to regulate copyrights. 
 
There are work-arounds to operate as a business-to-business venture instead of as an individual, but they put a hefty financial burden on freelancers with no financial benefit. A freelancer can form a limited liability corporation, which costs around $800 each year. Or the independent contractor can form a sole proprietorship which requires an annual business license in the city where do business. Other potential costs include filing for a fictious business name, publishing that name, and opening a bank account as well as specific tax filing obligations. So the contractors wind up earning less, not more.
 
AB 5 also appears to impose a virtually complete ban on freelance videography – a core function of the news industry. Smaller news sites, for example, that run video only on occasion rely on freelancers to videotape political debates to educate voters and may purchase freelance video of breaking news, such as a plane crash, wildfire, or police shooting. Restricting news outlets ability to buy freelancers’ videos means restricting your right to know what is happening in your community and around the world.
 
Industry experts say it’s likely AB 5 will be found unconstitutional as it applies to the news industry – the only industry granted Constitutional protections. 
 
Converting a worker to employee status is costly, since the employer must pay hundreds or thousands of dollars per work for unemployment insurance, workman’s compensation, plus pay around 10% of whatever the worker earns for various other costs. There are also higher accounting costs for payroll, withholding taxes and Social Security and reporting to multiple agencies – costs that don’t pencil out particularly for smaller businesses which rely on numerous part-time workers and for nonprofits that have no way to recoup those higher costs.
 
While some companies may have taken advantage of gig workers to dodge minimum wage or health benefits granted to employees, many gig workers say they prefer the flexibility of being independent contractors such as mothers of young children who wish to set their own hours. Employees, by contrast, must work hours set by the employer.  Seniors with Medicare and workers who have healthcare policies through another job or spouse’s employment may have no need for such benefits and prefer the freedom from control by others found in independent contracting.
 
Despite a statewide outcry, protests at her recent political event, and multiple lawsuits, Gonzalez-Fletcher remains staunch in her support of the new law.  This week, she told CBS news that she will not be issuing any proposed amendments to the law, merely “clarifications” that do little to ease the painful cost of AB 5 on thousands, perhaps millions of Californians.
 
Uber, Lyft and DoorDash aren’t waiting on legislation. The companies have stated they plan to spend $90 million on a 2020 ballot measure opposing the law which will give a decision by November 3, 2020.
 
Lisa Rothstein, a freelance cartoonist who calls AB 5 “sloppy, entrepreneur killing overreach” fought back by creating a cartoon calling for  AB 5 to be fixed or repealed – a cartoon that has been shown on KUSI TV and widely circulated on social media statewide.