The top two priorities for the coronavirus pandemic are keeping people safe and minimizing economic damage, in that order.
California’s Assembly Bill 5 is harmful on both counts and should be repealed. Its stated goal is to reclassify many independent contractors as full-time employees. If it worked as planned, those workers would receive higher wages and benefits. But AB5 is not working out that way.
Instead, AB5 is harming food and grocery delivery services that are more important than ever for people under quarantine during the COVID-19 crisis. It is also making it more difficult for people to stay home under social distancing orders and find work at a time when unemployment could reach record levels. The New York Times spoke with one Californian trying to start a community news organization and another performing translation services for doctors and courts who cannot find work because they are classified as freelancers.
AB5 backfired almost instantly. Vox Media was recently mocked online when, after publishing an article titled “Gig workers’ win in California is a victory for workers everywhere,” it fired hundreds of California-based freelance reporters.
Many gig jobs are work-at-home jobs, including many lost journalism and writing jobs. These jobs are not just a way to pay bills; they have safety benefits during a time of social distancing and self-isolation.
As a result of public backlash, California legislators were already looking at ways to fix AB5 before the coronavirus hit. Unfortunately, they are going about it the wrong way. Surprisingly, they seem to be looking to President Trump’s playbook for inspiration.
More than 90,000 companies have applied for exemptions from the Trump steel and aluminum tariffs. Sensing political opportunity, California’s courts and legislators are mulling similar AB5 exemptions. While offering exemptions has the virtue of requiring politicians to admit their policies are hurting people, it has three significant problems.
One, exemptions take time to process. We don’t have that right now. People are already falling behind on their bills. Small businesses are hurting, people are out of work, and AB5 is making it harder for people to stay afloat.
Two, the officials who grant exemptions would gain great power. There is a risk some would use this power to enrich themselves. California legislators would also be tempted to bully companies for campaign contributions by dangling AB5 exemptions.
Three, exemptions would give favored businesses a government-granted advantage over competitors.
These problems are fatal. AB5 is beyond repair. Rather than offer exemptions for the politically connected, legislators should give exemptions to everyone by repealing AB5 outright.
Meanwhile, affected workers are searching for ways to dodge the law—just as they have a pandemic to worry about. California is already seeing a spike in LLC applications, since people who form their own one-person companies are exempt from AB5. While their creativity is admirable, workers should not have to jump through all those hoops just to keep their jobs. These roundabout exemptions also cost a one-time $75 fee plus an annual $800 franchise fee.
These gray-market AB5 responses also undermine respect for laws at a time when lengthy quarantines risk causing resentment against stay-at-home orders, not to mention a potential mental health crisis due to loneliness.
The economy will eventually recover from the COVID-19 shock. When it does, the worker-employer relationship will be changed. Some workers will find they prefer working at home to the traditional commuting model. Flexible hours and locations can better fit some families’ needs. Easily moving from gig to gig allows workers to escape bad bosses. Many workers would rather choose their own benefits than be shoehorned into a one-size-fits-all company plan.
People today have more diverse needs and want more choices than their grandparents had. AB5 was taking that away before the coronavirus hit. It is hurting the response to it right now. And it will be obsolete once some form of normal returns. The time to repeal AB5 is now.
Ryan Young is a senior fellow at the Competitive Enterprise Institute, a free market think tank.
