Assembly Bill 5 is easily one of the most destructive bills I have seen during my tenure in Sacramento, and definitely the bill with the most far-reaching and consequential impacts on California workers. Passed last year and now California state law, AB 5 severely limits independent contracting, costing thousands of workers not only their jobs but their means of supporting themselves and their families.
Last year’s AB 5 completely changed the standard for determining whether a worker is an independent contractor or must be classified as an employee. That bill codified the decision in Dynamex v. Superior Court that overturned a 30-year old standard and replaced it with a new “ABC” test which is overly restrictive in its requirements and will eliminate most independent contracting in this state.
Troublingly, AB 5 does not treat all independent contractors the same. It arbitrarily picks winners and losers based on which industry could afford to pay a lobbyist to get their workers exempted. This list includes lawyers, doctors, accountants, brokers, cosmetologists, architects and engineers to name a few. There’s absolutely no justifiable reason that all professions aren’t being treated equally.
The proponents argue that this law empowers workers. I emphatically disagree. Eliminating opportunity and worker flexibility is not empowerment and will only stifle entrepreneurialism in our state. In reality this law discounts the thousands of workers in California who choose to be independent contractors and don’t necessarily want to be employees. In fact, a 2017 U.S. Department of Labor survey found that 79.1 percent of independent contractors prefer their alternative work arrangement. What gives the government the right to tell people how to make a living?
That’s why I have introduced AB 1925, a bill that will exempt small businesses from this law’s onerous and unworkable provisions. Specifically, my bill will help businesses that are independently owned and operated, have fewer than 100 employees, and had average gross receipts of $15 million or less over the previous three years. While it will not solve all the problems this law poses, it will allow small businesses who are just starting up or have limited resources to continue to enter into agreements with workers who choose to be independent contractors.
According to the U.S Census Bureau, businesses with less than 100 employees represent 97% of all businesses and employ nearly 36% of all workers. Altogether my bill will provide relief to more than 700,000 companies that employ over 5 million workers.
As a current small business owner who founded my videogame studio out of my Caltech college dorm room 30 years ago, I know that if AB 5 was the law when I first started my business, it would not exist today. Instead it would have been started in another state by someone else, and the hundreds of jobs that my company has generated over the last 30 years would have been lost. That would have minor consequences for California, but other start-ups who found their genesis here like Apple, Google and Facebook, would not be so minor. We must ensure that California nurtures entrepreneurialism in our state.
I have heard from many constituents who are horrified to discover that AB 5 takes away their very ability to make a living. Recently, a small business owner in my District was forced to close his business because of this new law. He had recently started a company that provided property checks at unoccupied vacation homes. Unfortunately, he can no longer operate without the option to use independent contractors. He feels that he has no choice but to move his family to a neighboring state that values his small business. This is just one example of another hardworking Californian who is being forced to leave our state. Countless other successful small businesses will cease to exist with this law in place.
California was once a crucible for innovation and entrepreneurialism. It is clearly that no longer. Our community is already experiencing tremendous fallout from this law. The industries who weren’t given an exemption are facing lawsuits or, even worse, losing their jobs. I will fight to pass AB 1925 this year to protect our small businesses- otherwise, I fear the consequences for our state, our children, and the generations of Californians to come.