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Sun10252020

Last updateMon, 24 Aug 2020 12pm

Do you freelance in California? Have a side hustle? Drive trucks? Work construction? Do nails? Work on political campaigns? Then you should be paying attention to a major employment fight coming to a head in Sacramento.

In the coming weeks, the state Senate will begin hearings on a bill that will make it harder to classify workers as independent contractors, officially codifying a sweeping 2018 California Supreme Court decision. The so-called “Dynamex” bill, supported by organized labor and named for the court case, has made headlines for threatening the on-demand business model made popular by the likes of Uber, Lyft, DoorDash and Postmates.

Less discussed, however, is the extent to which Assembly Bill 5 could sweep up some 2 million workers across industries far from the sharing economy and tech sectors, from truck drivers and general contractors to nail salons, strippers and perhaps even the freelance writers for this newspaper. The proposal has so unsettled mainstream businesses that they’ve banded together with sharing economy disruptors to run an “I’m Independent” campaign.

The legislation would rewrite the rules for when a worker is deemed an official employee, upending longstanding employment practices by winemakers, private investigators, music schools and other enterprises.

“Does AB 5 have very wide repercussions? Yes, that’s what makes the negotiations very complicated,” said labor-rights attorney Bill Sokol, who teaches employment law at San Francisco State University and is not a part of the negotiations.

California has long led the nation on employment practices, and AB 5 may be just the beginning as policymakers wrestle with updating labor codes in today’s app-for-hire world. Though the high court decision clearly raised the bar for treating workers as independent contractors rather than full employees, the devil is in the details that will be spelled out in the pending legislation.

AB 5 is being lobbied heavily both by business advocates and by organized labor, which seeks to ensure that gig-economy workers have workplace protections, including the right to collective bargaining. It has also put Gov. Gavin Newsom, who wants to be viewed as an ally to both labor and tech, in an awkward position.

“Everything is up for grabs,” Sokol said. “There’s no way to predict who’s going to end up with what. But labor recognizes that the American workplace they have traditionally organized—those worker relationships—have changed, and the laws have not kept up with them.”


Labor groups led by the 2 million-member California Labor Federation have united behind the proposal to limit the use of independent workers. Their contention: The gig economy has opened the door to mass exploitation of low-wage workers, a trend that is worsening income inequality.

Too many employers misclassify employees in order to cut costs, the unions argue, and strong curbs on the use of independent contractors, who aren’t eligible for many of the benefits and workplace protections mandated for regular employees, would slow that. Those curbs would also make it easier to reach groups, such as general contractors, that have long been difficult to organize.

But business advocates warn the change would dramatically ramp up labor costs in California, and have dire consequences for the state’s economy. In some sectors, such as ridesharing, widespread contracting isn’t even the long-term business model—it’s just an intermediate phase on the way to automation. Uber or Lyft, both headquartered in San Francisco, might stop operating in California altogether, they say.

Their hope is to carve out a third way that would allow employers to grant some benefits without having to categorize workers as full employees.

“We have a completely different economy,” said Jennifer Barrera, executive vice president at California Chamber of Commerce. “We have a huge group of individuals who really value their flexibility and control over their own schedule, and I don’t think it has to be one or the other.”

The California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles dealt with a same-day courier service that, to save money, had converted all its employees to independent contractors. A former employee claimed the shift was a Labor Code violation, and the litigation that ensued ended up reinterpreting a longstanding test for classifying workers. The ruling instead established a three-part test for certifying independent contractors, with the highest hurdle being that the work performed must be outside the core of the company’s business.

Even though the Dynamex decision is already law, labor representatives say many companies have been flouting it. AB 5 would ensure that workers would not have to file suit on a case by case basis to seek enforcement.

“There’s a whole bunch of things that they’re currently being cheated out of, frankly,” said Steve Smith, with the Labor Federation. “With respect to Uber and Lyft, it’s the exploitation they subject their workers to on a daily basis. Many of these workers are not receiving minimum wage; they are misclassified as contractors when they actually should be considered employees, meaning there’s a whole host of benefits they’re not getting that they should get like everyone else.”

In steering more people to employee status, the bill would force companies to offer basic worker protections such as guaranteed minimum wage, overtime pay, contributions to Social Security and Medicare, unemployment and disability insurance, workers’ compensation, sick leave and family leave. Workers could also get reimbursed for mileage and maintenance of their vehicles.

The state estimates it loses about $7 billion a year in payroll-tax revenue due to worker misclassification that could be supporting schools, roads and other public services. And by avoiding unemployment insurance taxes and workers’ compensation premiums, businesses shift the burden to the state when workers get laid off, get sick or get injured on the job.

“These billion-dollar companies can complain, but we have to ask ourselves as taxpayers: Should we subsidize their business by subsidizing their workers?” said Assemblywoman Lorena Gonzalez, a former labor organizer from San Diego who is author of AB 5. “That’s what happens when you don’t adequately compensate workers.”

She dismisses the idea that Uber and Lyft will flee the fifth-largest economy in the world. More likely, the lawmaker predicts, Uber and Lyft will make the changes required by law, because there’s a massive market for transporting individuals and goods in California. If they can’t manage it, she says, then someone else will.


Gonzalez’s bill is triggering pushback in part because the impact of the high court ruling is far broader than many Californians expected. Gonzalez says she’s heard, for instance, from newspaper publishers who want to keep using freelance journalists and beauty salons that rely on nail technicians. She’s even rattled folks in her own world of politics, because her bill would reclassify campaign workers as employees, not contractors.

Chris Shimoda, vice president of government affairs with the California Trucking Association, says trucking has been a pathway for people without advanced degrees to make more money. In fact, about 80 percent of drivers in the industry have a high school education or less, he said. But if firms are required to employ their own drivers, independent drivers who own their own $150,000 Class 8 heavy duty trucks may not be able to find work.

“We all agree there should be a pathway, especially for the blue-collar working class to rise up the economic ladder,” Shimoda said. “It’s just: What are the rules for the labor and employment law side of things? If there are specific things that have been abused, then what are those, and how do we reconcile that through this bill?”

As his association works to ease the potential impact of AB 5 on those drivers, the trucking industry has challenged the Dynamex decision in federal court, arguing that federal laws governing motor carriers pre-empt the state test.

Peter Tateishi, chief executive officer of the Associated General Contractors of California, which represents construction firms, said the bill would disadvantage small businesses, many of which are women-owned and minority-owned firms, that subcontract with builders, because contractors won’t be able to get outside help.

As for Uber and Lyft, the rideshare companies have sought compromise and held back-channel negotiations with the Teamsters and Service Employees International Union. The Labor Federation, however, remains committed to full employment status for rideshare workers. As a result, the gig economy companies have sought support in the court of public opinion.

In an open letter, Uber Chief Executive Dara Khosrowshahi and Lyft co-founders Logan Green and John Zimmer proposed maintaining their drivers’ freelance status but granting access to some employee benefits such as paid time off and retirement accounts. The executives, whose combined worth is over $1 billion, offered to form a new driver association to advocate for the drivers’ interests.

“We are public companies that tens of millions of people rely on for mobility and work,” they wrote. “If there ever was a time for new policies, it’s now.”


This week, the “I’m Independent” coalition led Uber and Lyft drivers around the Capitol to meet with lawmakers and staff to voice their desire to remain freelancers.

“I’m very offended that they would think they’re doing us a favor by calling us employees,” said Vivian Mallory, a 60-year-old Uber driver in Sacramento. “We want better rates, and we want more opportunities for benefits. I think we’re not against the bill being passed, but I think we want changes in the language.”

Mallory says she’s strategic about picking up longer rides that pay more and was able to average $4,800 a month last year driving. Another Uber driver, James Kyle, 58, of Roseville, said he needs to remain an independent contractor, because he works seasonally at charity golf tournaments.

“They’re taking the fun away from it,” Mallory said.

AB 5 supporters counter that drivers will continue to maintain a flexible schedule, because rideshare companies, like any employer, can pay wages based on the number of hours worked.

On the other side are drivers like 62-year-old Ann Glatt, who joined the Gig Workers Rising movement after noticing her share of fares declining over time with Lyft. She says she’s lucky to make $700 a week and would like to see changes to the way the rideshare companies categorize their drivers.

“Teachers are in unions. We’re not able to unionize because we’re independent contractors,” Glatt said.

She added that the labels put on drivers can be misleading.

“Uber and Lyft are not transportation companies—they are platforms. So that makes us customers, and the passengers are the end user. But really it kinda just means Uber and Lyft are not responsible for basic labor standards for people,” she said.

After speaking to CALmatters, Glatt said she stopped driving Lyft because she wasn’t able to make ends meet.

Requests for exemptions have so far succeeded in some sectors. Gonzalez has agreed to leave doctors, insurance agents, real estate agents, hair stylists/barbers who hold a booth rental permit, dentists, architects, engineers and accountants out of the law.

But business interests are pressing for more. Barrera said CalChamber would like to carve out licensed occupations, from court reporters to family therapists. While the author is committed to sorting through more positions, Gonzalez said the exemptions will need to stop at some point.

“I have a driver’s license,” she said. “That doesn’t make me a business owner.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

In the waning hours of the legislative session, Democrats pushed through new labor requirements widely viewed as retaliation against Tesla, the electric car maker embroiled in a union-organizing campaign at its Fremont plant.

Labor unions got lawmakers to insert two sentences into a cap-and-trade funding bill requiring automakers to be certified “as fair and responsible in the treatment of their workers” before their customers can obtain up to $2,500 from California’s clean vehicle rebate program.

At the time, Democrats openly wrestled with the concern that the United Automobile Workers—which is trying to maintain its major role in the auto industry as the companies make big bets on electric vehicles—was expanding its unionization campaign from the factory floor to the Senate floor. Sen. Steve Glazer of Orinda said the state should not “hold our environmental projects hostage to a fight with one progressive employer,” while Sen. Connie Leyva of Chino countered that California shouldn’t want companies to succeed at the expense of workers.

With regulators starting to draft the new rules, a lingering question remains: How far will California—the first state in the nation to approve a $15 minimum wage and a state that has set an ambitious goal to put 1.5 million zero-emissions vehicles on the road by 2025—go in order to graft its blue values onto the green sector?

“In politics, your oldest friends are your best friends,” said Dan Schnur, former head of California’s campaign watchdog agency and now a professor at the University of Southern California. “The tech people may have come to Sacramento with a lot of money and with an agenda that dovetails with the governor and legislators’ policy priorities, but they’re still the new guys on the block. Labor’s been there for a long, long time.”

Now state regulators—at both the state Air Resources Board and the Labor and Workforce Development Agency—will hold public hearings and draft rules for certifying automakers who want their vehicles to qualify for California rebates. The Legislature will then need to approve those.

Among the points of contention:

• What is “fair and responsible” to auto workers?

• How will the state weigh wage and benefit standards, or training and safety requirements, against manufacturing costs?

• How will the state certify vehicles made outside of California, or even out of the country—in places such as in Mexico and China—where wages are lower and labor regulations are less stringent? Or will automakers self-police by adhering to a code of conduct?

Dean Florez, a former Democratic state lawmaker and a member of the air board, said California can have both labor protections and environmental leadership as the state charts new territory.

“We shouldn’t be using public money to fund or support companies that do not meet basic worker protections,” Florez said. “We shouldn’t undercut the labor protections that we have fought for, for so many years. And I think that there is a danger in doing so; I think we would lose the confidence of the public for environmental leadership in the end.”

California’s new requirement will apply to all automakers, but it couldn’t have come at a worse time for Tesla, a company that prides itself on innovation and disrupting the status quo. When plant workers went public with complaints about low pay, long hours and unsafe conditions, Tesla co-founder and CEO Elon Musk labeled labor’s tactics “disingenuous or outright false.”

While making $17 to $21 an hour is above minimum wage, Tesla employee Jose Moran noted that a living wage in the San Francisco Bay Area is a lot higher—around $28. Musk responded that Tesla’s compensation package is higher than those at General Motors, Ford and Fiat when including Tesla’s employee stock program.

The company wouldn’t comment now, beyond referring back to what its policy director Sanjay Ranchod told lawmakers at a September hearing: “The company is committed to protecting the health and safety of its workers, and we are committed to continue and to make progress towards our goal of becoming the safest auto factory in the world.”

The nation’s newest automaker is also on track to be the first to max out on a federal tax credit of up to $7,500 per vehicle. And with its Model 3 sedans pitched as its affordable electric car at $35,000, Tesla will need California’s rebate more than ever to compete against other electric cars such as the Nissan Leaf or Chevrolet Bolt.

Business boosters wonder why the state would single out clean-energy vehicles over gasoline cars for greater scrutiny when 40 percent of the state’s greenhouse gases come from tailpipe emissions. They worry Sacramento’s pro-labor stance will dissuade companies from locating or expanding in California. Already, Tesla located its first battery factory just outside the state line in Sparks, Nev.

Politicians say they want good-paying jobs, and to grow manufacturing and reduce greenhouse gas emissions, “and yet, we’re in the ironic place where Tesla is being attacked by some elected officials relative to whether or not their workers are unionized,” said Carl Guardino, head of the Silicon Valley Leadership Group, a trade association representing nearly 400 Silicon Valley employers, including Tesla.

California is home to about 10,000 auto industry workers, virtually all from Tesla. That’s compared to 38,000 in Michigan, 24,000 in Kentucky and 20,000 in Ohio, according to the U.S. Labor Department’s Bureau of Labor Statistics.

Union representatives say the goal is not to slow the production of clean-energy vehicles. Rather, they maintain that if taxpayer money is being used to help sell cars, then it’s up to the state to make sure it results in good-paying jobs.

“This is all part of our work at the labor movement to make sure there’s accountability for public investments,” said Angie Wei, an influential lobbyist for the California Labor Federation, the umbrella group for unions including the UAW. “If we’re going to put taxpayer money into it, then we’d sure better be getting something out of it for jobs.”

The union also is trying to maintain its role as the auto industry makes big bets on electric vehicles. Just this year, Volvo and GM announced plans to phase out conventional engines. The union can also use a win in labor-friendly California after losing an organizing effort at a Nissan plant in Mississippi, a right-to-work state.

It’s worth noting the Nummi plant that Tesla took over in Fremont was represented by the union before the joint venture between GM and Toyota closed in 2010.

“It is about Tesla, and it isn’t about Tesla,” Wei said. “We had a gas-and-combustion industry that for decades created good middle-class jobs. They’re now being replaced by electric vehicles. This is our new economy, and with major public investment. The question is: Are we going to allow the auto industry to create and maintain middle class jobs? Or are they going to become the next Walmartization of the economy?”

Sacramento has placed itself at the forefront of cleaning up the environment. Gov. Jerry Brown and fellow Democratic lawmakers have pitched California as a model to the world for reducing air pollution and greenhouse gases that contribute to climate change, in direct response to the Trump administration’s anti-regulatory philosophy.

But California has also had a longstanding relationship with labor unions, boosting the minimum wage and offering access to paid sick and family leave. In recent years, the California Labor Federation has successfully pushed legislation to protect immigrant workers from threats of deportation and expanded authority for the state to go after employers who skirt overtime or minimum-wage laws.

Lobbying reports show Tesla spent $189,237 on lobbying in the three-month cycle during which the bill was debated, compared to $103,351 for the labor federation. But labor’s might comes also from being able to mobilize its members on issues and during elections.

Democratic lawmakers who struggled to prioritize the interests of two political allies will have more to soul-searching to do next year. Democratic Sen. Scott Wiener of San Francisco, who has a record of advancing the green economy and supporting prevailing wage to maintain union pay on public works projects, said he was unhappy that the so called “Tesla rule” had been inserted at the last minute. “This is significant and important enough that it should be vetted through a normal legislative process with public scrutiny. That, to me, is the best way to come to the right solution,” he said.

His fellow Democratic lawmaker and San Franciscan Phil Ting, who chairs the Assembly Budget Committee and authored the measure, insisted it strikes “a good middle ground.”

“We could have said, ‘You’re not going to get any money unless your workforce is unionized.’ That could have been something we inserted. We didn’t,” Ting said in an interview. “Having said that, we also could have done nothing. So if you look at the two extremes where we could done nothing or we could have dictated the type of workforce, I think this is the middle of those extremes.”

Ultimately, the decision to unionize remains up to workers. Michael Catura, 33, a battery-pack line worker who has been at Tesla for nearly four years, said he supports joining the union, because it would mean a higher wage and seniority for him. As the son of a postal worker, Catura said he has been disappointed that he has been passed over for promotions because supervisors can play favorites. He said he started at $17 an hour and now makes $21 an hour.

Catura has one message for Elon Musk: “I would tell him, ‘Hey man, scratch my back, and I’ll scratch yours. Give us more than just a bone.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

On this week's deceptive Independent comics page: This Modern World checks in with Glox News and wonders whether the Supreme Leader really loves this land mass; Jen Sorenson looks at "right to work" states; The K Chronicles meets Black Rob Lowe; and Red Meat enjoys some animal bloopers.

Published in Comics