California’s new labor law is a work in progress. Here’s how lawmakers could change it

The California Legislature is considering nearly three dozen bills to clean up or repeal the landmark gig economy law signed by Gov. Gavin Newsom just months ago.

Assembly Bill 5 limits employers’ ability to label employees as independent contractors, and requires businesses to give benefits like sick pay and overtime to workers.

Newsom signed the high-profile legislation in September, granting what proponents say is much-needed relief to low-wage workers who take on more than one job to manage an increasingly expensive California. Others have criticized the requirement for stripping people of workplace and scheduling flexibility.

Tech giants Uber, Lyft and DoorDash are trying to overturn it with a costly ballot initiative. Others, including the California Trucking Association, are fighting the law in court.

Democrats say the law needs fine-tuning; Republicans want to overhaul it.

Proposals from Republicans include exemptions for a slew of workers like youth sports umpires, pharmacists, loggers and journalists. Democrats are advocating for money to help businesses comply with the new regulations.

Here’s a look at what legislators are considering.

Financial assistance

Assemblywoman and AB 5 author Lorena Gonzalez, D-San Diego, said she’s heard countless stories of people who’ve benefited from the law. But Gonzalez said she always planned to incorporate feedback after AB 5 passed for clean up efforts.

Gonzalez is asking Newsom to consider a one-time tax relief that would help independent contractors who want to continue working for themselves acquire a legal status as a limited liability company, which would make it easier for them to maintain contracts and operate under the new law. She’s asking the state to waive temporarily an $800 fee.

“We know many of California’s independent contractors who operate as actual small businesses are making a good faith effort to comply with AB 5 and formalize themselves and their business licenses,” Gonzalez said in a statement. “This one-time relief will help these business owners with the transition to becoming LLCs.”

Newsom wants to allocate more than $20 million to help enforce the law through the state budget, and Gonzalez also asked for nearly the same amount to help non-profit arts programs that are making a “good-faith effort” to comply with AB 5.

Gonzalez introduced a bill to carry the amendments, including a relaxing of restrictions for freelance journalists, and she said she planned to “address the unique situation regarding musicians” in March revisions. She also introduced a bill to help the beauty industry, including manicurists, barbers and cosmetologists.

“I do believe in AB 5 and will fight any attempts to repeal it. I will fight Uber’s attempt to exempt themselves through initiative. But, I thought I had been clear that I was taking meetings, listening and going to make clarifications. I guess that got lost,” Gonzalez wrote on Twitter on Feb. 6.

Repeal and replace

A crew of Republicans are leading the effort to chip away at AB 5, which they’ve called an “anti-worker law” that’s “decimated” industries.

Senate Republican Leader Shannon Grove thinks minor changes to AB 5 are inadequate. She’s proposing a “repeal and replace option.”

Grove introduced Senate Bill 806 as a “much more expansive test” to classify independent contractors as employees.

“Independent contractors are being hurt by this anti-worker law and some have lost their ability to earn a living. This disastrous law must be repealed and replaced so Californians can once again have flexibility in the freelance economy,” Grove said in a statement.

Assemblyman Kevin Kiley, R-Rocklin, also announced legislation to “nullify” AB 5. His proposal would prevent new laws from blocking flexible work schedules and would revert California’s labor law back to include a pre-AB 5 test to label workers.

“Even before Assembly Bill 5, California’s laws were more hostile to workers than any state in the nation,” Kiley said, “with arbitrary restrictions on vocational freedom and working conditions.”

Carving exemptions

Repealing AB 5 is unlikely, as is replacing it. But Republicans also wrote a bundle of bills that attempt to carve out exemptions for certain industries.

The proposals cover referees, musicians, newspaper carriers, loggers, ride share drivers, physical therapists, and franchisers. Most bills carry a companion measure in the opposite house.

“Californians providing for their families or earning extra cash shouldn’t be put in the middle of a union fight in the State Capitol,” said Sen. John Moorlach, R-Costa Mesa, after he introduced a bill to exempt ridesharing companies from AB 5. “The gig economy is an embodiment of the free-market and does not need to be over-regulated by Sacramento politicians.”

Republicans also wrote legislation to exempt small businesses and geologists. They want facilities that contract with companies that employ health care workers like podiatrists, surgeons and dentists to also be spared from AB 5. Marriage counselors could also be cleared.

Democrats hold supermajorities in both houses of the Legislature, leaving little chance that the Republican proposals would pass.

A third option

Sen. Cathleen Galgiani, a moderate Democrat from Stockton, isn’t trying to repeal or exempt professions from the law. She wants a “third classification of workers” instead. Galgiani voted for AB 5.

Senate Bill 1039 would task the Legislature with developing a “modern policy framework” for independent contractors. This classification would guarantee “basic rights and protections” like minimum wage and insurance for people who get hurt on the job.

“While AB 5 rightfully sought to rectify the harm of misclassified workers, it did so in the confines of an outdated, binary system, and has resulted in the loss of work opportunities for millions of Californians due to the overclassification of workers as employees,” said Jeremy Gottschalk, executive director of the Marketplace Industry Association, the bill’s sponsor.

Labor groups have already discredited the proposal as a threat to workers’ rights. The California Labor Federation said in a Feb. 19 letter that SB 1039 fails to consider workers who have no ability to choose independent contracting over employment.

“It is a sub-standard category of worker who can be exploited without recourse and subjected to employer control without safeguards,” the federation wrote. “If a new legal category of worker is created that is cheaper, has fewer rights, and can be more easily abused, no worker is safe.”

This story was originally published February 24, 2020 at 5:00 AM with the headline "California’s new labor law is a work in progress. Here’s how lawmakers could change it."