The brunt of Assembly Bill 5 hits full force come January 1, when Californians working in more than 48 occupations will either be out on the street from the loss of their independent contractor status or will be classified as employees by the firms using their services, according to NFIB California, the state’s leading small-business association.
“We want not only our members but also all small-business owners to be aware of and prepare for changes in many of their livelihoods come the first of the year,” said John Kabateck, California state director for NFIB. “I can’t think of a better example of what damaging things can happen to real people when a court takes it upon itself to legislate rather than adjudicate and when a legislature exacerbates rather than ameliorates.”
Kabateck’s reference is to the Supreme Court of California’s 2018 Dynamex Operations West, Inc. v. Superior Court of Los Angeles County decision that pronounced especially rigid rules for independent contractors. Under the new ABC test, entrepreneurs are prohibited from working as independent contractors if the services they provide are essential to the hiring company’s business model.
In the wake of the Dynamex decision, it was left to the Legislature to sort out the mess. But rather than restoring the freedom of a contractor for legitimate entrepreneurs, the Legislature doubled down on the newly minted ABC test. And while the Legislature picked some winners who would receive special exemptions, innumerable other businesses were denied the exemptions they need to continue working as contractors.
According to NFIB Legal Center staff attorney Luke Wake, those occupations include franchisees, independent truckers, linguists, snow removal services, yoga instructors, interior designers, mid-wives, taxidermists, dieticians, florists, massage therapists, home entertainment system installers, hairdressers who rely on a salon’s credit card processing terminals, physical trainers, event planners, dog groomers, animal trainers, pool-cleaners, tutors, and possible others.
Wake identifies numerous affected businesses contracting with previously classified independent contractors. This includes businesses that refer customers to locksmiths, security or fire-alarm installers, tree trimmers, pest control service providers, auto-repair service providers, coaches, landscapers, childcare workers, travel guides.
Click here for a single page of Wake’s list.
“There is only one way out of this man-made mess and that is for the Legislature to exempt all legitimate business-to-business relations,” said Kabateck. “There’s enough revenue to be made from the normal course of business-to-consumer taxes. Our lobbying effort for this will begin by reminding everyone this is not about Uber and Lyft, it’s about hundreds of other independent contractor classifications.”
A collection of background information can be found at this source.
Keep up with the latest on California small-business at www.nfib.com/california or by following NFIB on Twitter @NFIB_CA or on Facebook @NFIB.CA
For more than 75 years, NFIB has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. NFIB is a nonprofit, nonpartisan, and member-driven association. Since our founding in 1943, NFIB has been exclusively dedicated to small and independent businesses and remains so today. For more information, please visit nfib.com.
NFIB
921 11th St. Ste. 400
Sacramento, CA 95814
916-448-9904
www.nfib.com/CA
Twitter: @NFIB_CA
Facebook: @NFIB.CA
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If there were some form of universal healthcare where everyone was covered for medical issues, wouldn’t workers comp be unnecessary in the above example?
A disability policy would probably still be required for long term disabilities, but workers comp medical may not.
How would insurance companies react? Some say they would welcome writing no more WC policies but I doubt it. It is such a cash cow for them. I bet they would wish to keep it alive.
Pacific Legal is taking this case. They have become extremely selective as late, but they are on this. Follow.
https://pacificlegal.org/new-california-law-threatens-to-kill-the-gig-economy/
But everyone overlooks the benefit to the government by having more “employees.” The payment of employer & employee contributions to social security and medicare are higher than the payment by a self-employed independent contractor. Suddenly unemployment taxes are increased with a hefty increase in payments into the state unemployment fund and the federal unemployment fund and finally, and most importantly, the workers compensation insurance companies get a real windfall with new workers’ comp policies being written all over the state. You gotta remember who some of the biggest contributors to re-election campaigns are: insurance companies. It’s kinda a race whether it’s pharmaceutical companies or insurance companies or trial lawyers who are the biggest contributors to re-election campaigns. Win-win for pols everywhere. The mere fact that many small self-employed workers will no longer be employed is of little consequence. Unless they have been enrolled and contributing to the unemployment fund they won’t even be able to collect unemployment. Ha ha ha ha too bad for you seems to be the attitude of Sacramento politicians.
And, of course, bureaucrats in all the taxing agencies are sure that the self-employed are hiding income and avoiding income taxes, so if they are on payroll they can’t do that any more.
Interesting factoid about homeowners workers’ compensation coverage. I didn’t notice it mentioned in the policy coverage I received, so I called my agent to find out if I had workers’ compensation coverage for casual labor I might hire. She assured me I did. I said I didn’t see that coverage in the policy sent to me. She informed me that it wasn’t included. I asked for a written copy of the coverage.
When I got it I found out that I did have worker’s compensation coverage AFTER I HAD PAID THE EMPLOYEE $600 IN WAGES.
Now you might wonder why $600 in wages. That’s the trigger figure where you have to get an employer ID number and pay all the government mandated benefits, SSI, Medicare, deduct SDI, pay state and federal UI and have worker’s compensation insurance coverage — actually you had better have workers’ comp from $1.00 of payments. Jose, the guy you hired from in front of Home Depot, arrives and an hour after he has been cleaning up weeds and leaves from your back yard he comes to you and says that he has hurt his back, you had best flee the country because your house is now forfeit to the state for willful non-insurance. “But, but, but” you exclaim, “He is a self-employed worker, working for many individuals. He’s not an employee. I contracted with him to clean up my yard.”
Ah, wrong, Cricket. You have failed the first test in workers’ comp law. He is classified as a casual laborer and is your liability to own and pay for. When I last worked for the WCAB as it was styled then, the penalty for not having workers’ comp was 100% of the award. I doubt it has been reduced in the intervening years. That means if Jose’s hospital bill, chiropractor bill, physical rehab bill, temporary total disability compensation and permanent disability award come to $500,000, not an unreasonable amount for a back injury, your total bill will be a cool one million. Got that stashed away in an offshore safe deposit box? No? Goodby house, hello having the state put a lien on everything you think you own and al your earnings until you have paid off the one mil you owe to the WCAB.
So with a simple stroke of the pen, the Uber driver who gets injured in a collision, instead of, perhaps qualifying for reduced medical expenses and some relief due to his limited income, now is required to be covered by workers’ comp and the bill gets passed to the employer for his horrendous medical expenses. A win-win for politicians and bureaucrats everywhere in the state.
I foresee zero to extremely small chance of getting this legislation overturned. Look for lots of small businesses, taxicab companies, small trucking firms, delivery services, any service that uses independent contractors on an assignment basis either going out of business or if they are a nationwide corporation, closing their California operations.