Just before the pandemic struck, a new law infected California. Known as AB 5, the law upended 30 years of the freedom for people to work as independent contractors and reclassified millions as employees. The worst of legislative hubris, the law was unprincipled, exempting the politically-well-connected and clearly targeting certain companies for punishment for failing to conform to desires of the political class.
The economic concerns began immediately piled on top of a state economy already throttled by shutdowns and mandates. Now the gig economy, the marketplace for short term contracts and freelance work, was under attack. Popular and broadly-used gig economy companies, used heavily during the pandemic as people sought to stay home or otherwise obey new rules, faced a decision, comply with a law that would run them out of business because of enormous cost increases or end the business themselves.
By the fall, decision time was near but by then a ballot initiative was offered for the November 2020 election. Known as Proposition 22, the initiative sought to make an exception to AB 5 for transportation and delivery companies to allow people to continue to be independent contractors. These contractors would also receive better pay of 120 percent of the local minimum wage for each hour a driver spends driving, for each mile driven with passenger or en route, a health insurance stipend and paid medical expenses and backfilling a portion of the lost income for drivers hurt while driving or waiting. The ballot initiative was hugely popular.
Nearly 10 million Californians, 59% of those voting, agreed that the initiative was a great deal for people, independent contractors who would also maintain their freedom to work as they saw fit and not be classified in a one-size-fits no one system. If only good public policy were so easy.
The problem for a tiny minority of Californians was that independent contractors are not represented by trade unions and so are hard to organize. Their liberty is a threat to so called organized labor. So, the Service Employees International Union, with a mere 700,000 members in California, sued to keep the will of the millions of people from taking effect.
One judge agreed with the union on largely technical grounds and struck down the law. A group of gig economy companies, including DoorDash, Instacart, Uber and Lyft immediately appealed. They fought to continue serving Californians and to allow independent contracting as a choice for those who seek more flexible work arrangements, and the accompanying benefits that they would be guaranteed.
The economic pain being caused by the desires of the trade union and unprincipled governance of the legislators are clear. Not long after the judge’s decision, the California Center for Jobs & The Economy reported that California had regained only about two-thirds of the 2.7 million jobs lost in the early months of the pandemic.
The state lags behind the rebound rate in the rest of the U.S., and likely will not see a full recovery until the end of 2023. Once again, the rest of the rest of the country is moving ahead while Californians are made to suffer because of poor public policy.
Government does have a role to play but it is not what the unions nor restrictive legislators desire. The state should look to maximize employee opportunities, not limit them. The freedom of Californians to work as they want, expanding opportunity for all and promoting business model innovation should be the goals, not forcing the workforce to comply with a special interest fueled, government enforced conception of appropriate work.
As the California Constitution states, “all political power is inherent in the people.” The people spoke clearly. The legislature could guarantee options for all the people. Will the legislature listen or continue to ignore the will of the masses?
Bartlett Cleland is a senior fellow in tech and innovation at the Pacific Research Institute.
