Love it or hate it, for a variety of reasons when California enacts public policy the impact is felt across the country. And so, it has been again with the January 1st implementation of California’s Assembly Bill 5 (AB5), the so called “gig employment” law that changes the worker status of employees and independent contractors. Innovation in how we work, and the opportunity to work in innovative industries could be forever reduced across the country.
The new law was written to codify a 2018 California Supreme Court decision that created the presumption that workers are employees and need to be classified that way rather than as independent contractors even if that was their intention. The state law also included placing the burden of proof for proving individuals are independent contractors on whoever is engaging them to do work. The presumption is now that a person is an employee unless it can be proved otherwise. Independent contractors are legally discouraged except for those working in the areas that the state assembly arbitrarily decided to exclude from the new burden. Freelance journalists and artists, people who enjoy being independent, are even now lobbying for their carve-out.
Independent contractors can be a critical tool for a start-up company, as a means of hiring only what is necessary and funneling the saved precious resources into becoming a successful ongoing operation with many employees. Technology companies have become known for this approach but it is a common practice across many industries. Limiting the opportunity for businesses to start and grow is not without economic impact.
The gig economy, that is the marketplace for short term contracts and freelance work, particularly suffers. Companies such as Lyft, Uber, DoorDash, Postmates, TaskRabbit, Helping, and many others face an extinction level event. This is why companies such as Lyft and Uber opposed the law, and why Uber and Postmates sued to stop the law from taking effect.
Even more important is the suppression of worker choice. Many workers prefer controlling their work and enjoy the flexibility and independence that being an independent contractor can bring. New workforce models are empowering people to choose for themselves how they will work and live. This is liberty.
“Work” no longer has to be what it is has meant since the dawn of the industrial age. No longer must a person drag in to a cubicle-filled building to sit and grind out eight hours at a desk draped in the corporate uniform. That option still exists for those who choose it. But now other options have been made real for millions of workers. Work and income can now be determined by many more individuals that ever before and much more easily, rather than being defined by government regulations or dictated by social expectations.
Why would a state that is seen by many as a birthplace of innovation disallow innovation in the workforce? Why limit a worker’s freedom and opportunities to make a living the way they want, the way they see fit and the way that works best for them, not for a boss? No doubt politicians have succumbed to the siren song of special interests such as labor unions, or a wrong-headed belief that a nanny state can provide to people what they want. This failure places one more government created stumbling block in front of those who would improve their lives and income.
Sadly, the California worker hegemony has caught interest in Washington, DC where some would like to spread this command and control approach across the country. The House of Representatives has been advancing the so called “PRO Act,” which is designed to enact increasingly stringent worker classification standards at the national level, just like AB 5. The goal of the PRO Act is the same, more employees, more union control and less worker freedom.
Why would government stand in the way of opportunity, worker freedom and innovation? Government does have a role to play, and that is to maximize employee opportunities not limiting them. A worker’s freedom to work as they want should be the goal, not forcing the workforce to comply with a special interest-fueled, government enforced conception of appropriate work.
Bartlett Cleland is a senior fellow in tech and innovation at the Pacific Research Institute.
