Backgrounder

Warnings from California, the harms of attacking entrepreneurship and freelancing

Tags:

gig economy, Independent Contractor

Assembly Bill (ABwas recently signed into law in California and has had devastating effects on independent contractors and freelancers in the Golden State. Gig economy workers have been hit especially hard. AB5 replaces the common law test with the ABC test to determine whether a worker is an employee or independent contractor.  Since the law went into effect on January 1, 2020, hiring entities are now required to classify workers as employees unless they meet all conditions of an ABC test.

On September 4, 2020, Governor Gavin Newsom signed AB 2257, which was introduced by AB 5’s same bill sponsor and exempted several types of independent contracting from the law. While AB 5 is still doing harm in California, the exemptions show that even the bill’s supporters realized the action went too far. However, some federal legislation such as the PRO Act, mirror the original aim of AB 5’s attack on independent contracting and the gig economy― and yet does not include any exemptions.

Below are the real stories of Californians whose lives and livelihoods have been turned upside down by the new classification:

 

Shelby Givan 

Shelby Givan was a full-time teacher until she became pregnant with her first child in 2019. In order to spend more time at home with her son, she elected to begin job sharing at her local elementary school, splitting responsibility with another educator. She also began working as a freelance educator to supplement her income. The contract role—a virtual learning opportunity that was based overseas—allowed her to work early in the morning before her son woke up, enabling her to spend most days fully devoted to being a full-time, stay-at-home mother. But the passage of AB5 changed that. Shelby, along with many of her California-based friends who also worked as freelance educators, was notified that she was no longer legally allowed to work.

Shelby’s family was faced with several decisions, including her potentially having to return to full-time work and leave her son in someone else’s care, a decision that she felt was being made for her.

“It’s like the government is trying to tell me that they know what’s best for me and for my family more than I do,” Shelby said. “They took away my right to work and my right to make decisions about my own life. It’s impacting my ability to be the mother that I want to be and forcing me to take time away from my family, and for me, that’s personal.”

So personal, in fact, that it led Shelby and her family to relocate out of California. The family is moving to Idaho, where Shelby can freely work as she sees fit, including becoming an independent contractor once more.

 

Cecily Whiteside *

Cecily Whiteside was making plans to expand her successful writing business, until she learned that AB5 made it illegal for her to do so. The marketing, writing, and editing expert ran a marketing writing company for years, which became so successful that she was in the process of bringing on three independent contractors to assist with her workload. Cecily has devoted her life to her business, growing it from the ground up, and was excited to expand, knowing that it would allow her to take on larger contracts and expand opportunities for her subcontractors. But AB5 has stalled the expansion, preventing her from hiring independent contractors to assist with writing and editing. The bill’s vague wording has also cast doubt in the mind of her clients based outside of California―the ambiguous language and lack of clarity around what constitutes a publication or a blog has caused clients to forgo renewing their contracts with Cecily out of fear of litigation. 

Cecily believes AB5 is not only an overreach by the government, but also a potentially discriminatory act against women. As a mother of five children, she knows the value in setting her own schedule and having the financial freedom that contracting allows. She worries that under AB5, many women—who are often primary caretakers of children or other family members—will lose their opportunities to earn a living in a manner that suits their chosen lifestyles.

 

Laurie Blunk

Laurie Blunk is a mother, a nurse educator, a registered nurse, and a survivor of Multiple Hereditary Exostosis (MHE). MHE is a hereditary disorder that has left Laurie with 35 painful tumors covering her body, forcing her to manage chronic pain and adjust her lifestyle. Independent contracting was the perfect fit for Laurie―it allowed her to pursue her passion as a nurse educator, teaching the next generation of nurses, while working manageable shifts and building in breaks when needed. Laurie was compensated well, as she was able to set her own rates, and she flexed her schedule to accommodate her needs. She considered herself privileged to be earning a living while pursuing her passion—until AB5 was passed.

AB5 took away Laurie’s ability to contract as a nurse educator, and with it, her ability to earn a living while managing her health. Laurie feels she’s been betrayed by the state—she resents the government’s assumption that she is incapable of making a decision for herself on how to work. AB5 has left Laurie uncertain of what her future holds—how she will earn money, who will hire a disabled woman, how she will be able to manage her pain. One thing is certain for Laurie, however: the solution likely won’t be found in California.

 

Margarita Reyes*

Margarita Reyes is an actor and content and film producer in California. She primarily works in the indie film industry, with low-budget filmmakers that do not have the budget to hire every employee as a full-time worker. So Margarita, along with hundreds of other actors and producers, often works as an independent contractor for filmmakers. Freelancing afforded Margarita an income and the flexibility to pursue her passion as she saw fit—until AB5.

Margarita says that the indie film industry has been decimated by AB5, including the actors, writers, directors, and producers that work within it. She has not signed a film contract since January 1, 2020. She has since tried to find acting work that hasn’t been impacted by AB5, but her options have been even more limited since the COVID-19 crisis took its hold in the state.

Margarita knows the value of independent contracting more than most people: Freelancing had empowered her to provide for her family while raising her daughter as a single mother. Despite the impact that AB5 has had on her personally, she is more worried for the single parents, young mothers, and seniors who rely on contracting to survive. Freelancing sustained Margarita and her daughter when they needed the income most—she worries for those who have lost their ability to provide for their families as a result of AB5.

 

Valerie Fausone

Valerie Fausone is a third-generation Californian who expected to call California her forever home. But her plans changed after the implementation of AB5. Within one month of the bill’s passage, Valerie’s contract work was terminated. Six months later, she is planning her move to Nevada, forced to leave the community that she has actively contributed to for decades because of a bill that took away her right to work as she saw fit.

Valerie is an animal welfare specialist with over 20 years of experience. She consulted with animal shelters, helping them implement no-kill policies and connecting them directly with members of their communities to increase live releases. Valerie’s skillset served as a win-win: she was able to help shelters, which often lack funds, on an affordable, contract basis, while setting her own rates and schedule. The ability to consult with multiple clients allowed Valerie to help thousands of animals while making a comfortable living. But that all changed with the passage of AB5.

In January, Valerie was notified by the shelters that they were no longer able to pay her or utilize her services as a contractor. The shelters did not have the funds to offer her full-time employment either. But even if they had, Valerie wouldn’t have been interested in accepting a full-time role. For Valerie, the benefit of setting her own rates and schedule, as well as the impact she was able to have on the community by partnering with multiple clients, was greater than full-time employment. In May, Valerie made the decision to relocate her business and her life to Nevada. California, the state she had called home her entire life and had taken away her livelihood—was no longer home.

 

Monica Fontes *

Monica is a 61-year-old cancer survivor. She was contracted as an interpreter for eight years until AB5 took away her ability to work. Monica’s role as an over-the-phone interpreter gave her the flexibility her lifestyle demanded. She was able to take breaks as needed to manage the pain that accompanied chemotherapy, a benefit that most full-time or in-person opportunities couldn’t offer her. She earned good pay, but for her, the benefit of contracting was the joy it brought her each day. During the lowest points while battling cancer, her work gave her something to look forward to, something to take her mind off the pain and made her feel useful. She called her work “her salvation against depression.” But since January, the depression has often won.

After AB5 passed, Monica lost her contract position. More than that, she lost the one thing that kept her mind off the pain and the unknowns of cancer. She knows that her chances of getting full-time employment that allow her to manage her pain and lifestyle are slim. The impact of AB5 has been exacerbated by the COVID-19 pandemic and resulting shutdowns. She wishes that while being shut in her home, she could have also been working. Working as an independent contractor gave Monica financial freedom and hope. Now, she has lost both.

 

Lilly Walters *

Lilly Walters owned a thriving face-painting business in California–so thriving, in fact, that she often subcontracted with other artists to meet the demand of her clients. But AB5 changed that. Lilly went from routinely entertaining at corporate family events and ski resorts—large-scale events where she would subcontract with six other artists—to struggling to book jobs. As a talented artist, her clients sought out her work and trusted her to subcontract with other talented entertainers. Lilly appreciated the flexibility and loved that she was able to help other artists, especially those who were just starting in the business.

Under AB5, Lilly is no longer able to subcontract to other artists. The bill has prevented her from being able to take on large-scale events and clients, damaging her business reputation and her income. More than 50 percent of her work has evaporated. The COVID-19 pandemic and resulting shutdowns didn’t help Lilly’s business prospects, but she questions why her state government has made it even more difficult for Californians to earn a living during a global pandemic. She worries that even after the effects of the crisis pass, she won’t be able to financially recover—the negative implications of AB5 will outlast COVID-19.

 

Brian Butler 

After seeing the demand for vacation rentals in Big Bear Lake, Brian Butler and his wife established Big Bear Cabin Check, a service that provided property checks and maintenance for rental properties. The company maintained properties for home-owners who lived out of state and provided cleaning services between renters. As the demand for their services grew, eventually servicing more than 55 properties, Brian and his wife found themselves unable to meet the demand alone. They began hiring independent contractors to help maintain the properties, a common occurrence in the vacation town.

Brian and his wife did everything right. They ensured that contractors were brought on with 1099 forms. The workers that freelanced with them negotiated their rates and schedules and were able to contract with other clients. It was a legal, positive experience for all parties involved—until AB5 passed.

After AB5 passed, Brian and his wife were told that they would either need to hire their contractors as full-time employees in order to legally pay them, or that their contractors would each have to obtain a business license. There was just one problem: Neither option was in the best interests of the business owners or the independent contractors. Forced with the decision to end his agreements with the contractors, Brian and his wife tried to maintain Big Bear Cabin Check’s properties alone. In their end, AB5 had created an environment where their success was their downfall. They were unable to keep up with the demand without help from contractors.

Brian wrote to both Governor Newsom and Senator Gonzales, appealing them for exemptions for small businesses and asking them to consider the effect of the bill on entrepreneurs and small business owners. He never received a response. Less than six months after the implementation of AB5, Brian and his wife—both born and raised in California—made the difficult decision to relocate to Arizona. They plan to establish a business there, free from the regulations that destroyed their livelihood in California.

 

Nikole Wilson-Ripsom

Nikole is the parent of a special-needs teen and suffers from a disability herself. Though her disability does not qualify her for disability payments, it prevents her from being able to manage the majority of full-time employment opportunities. Her responsibilities as a caretaker for her son add another layer of difficulty to full-time employment. When Nikole’s son was young, her income was solely reliant on her work as an independent contractor. Freelancing gave her the flexibility to be present for the more than 20 hours per week of behavioral and occupational therapy that her son requires. As her son got older and his therapy needs slowly decreased, Nikole was able to obtain a part-time job, but still continued to supplement her income by continuing to freelance.

Since the passage of AB5, she has no longer been able to serve as an independent contractor. Her finances have suffered as a result, forcing her to end therapy for her son and cut back on the nutritional supplements that he benefited from. Nikole’s ability to give her son the treatments he needs to thrive has been harmed by AB5. She, like thousands of others, wonders why the government continues to advocate for the harmful bill, despite hearing from their constituents about its harm.

 

Aimee Benavides *

Aimee Benavides built a career for herself as a freelance translator and interpreter, balancing work with her parental duties as a mother of two. Her nine-year-old daughter has autism, and freelancing has given Aimee the freedom to manage homeschooling for her children and scheduling therapy appointments for her daughter while earning a living. She worked hard to create a profitable home-business and worries that it will have been for nothing with the impact of AB5.

As an independent contractor, Aimee is able to work when she sees fit, whether that means at 5:30 in the morning before her kids wake up, or at 10 a.m. if her kids had a rough night’s sleep. She works hard and balances it all because it benefits her family, offering flexibility that full-time employment would not give her. AB5 threatens that flexibility and her livelihood. As an independent contractor, she has been able to set her own rates and negotiate her own terms, including cancellation fees. Aimee knows that if she were a full-time employee, she wouldn’t have these same benefits. For Aimee, the benefits that contracting offer her, and ultimately her family, far outweigh any benefit that full-time employment would bring.

 

Liam Murphy *

Liam Murphy works as a freelance architectural designer. While he worked to complete the licensing requirements required by California, including national and state exams and logged hours, Liam had been contracting with a San Francisco architectural firm. Freelancing gave him the flexibility to prepare for his licensing exams, earn money, and manage a family design project, and was beneficial for his employer to have an experienced, trusted contractor without the training investment and overhead costs.

Unfortunately, after the passage of AB5, Liam’s contract was placed on indefinite hiatus. The firm cited the bill’s gray area as a risk of potential litigation if they continued to pay Liam. Liam has been forced to devote time to unpaid research instead of paid work as he decides whether or not to form a corporation to meet the criteria of AB5. For Liam, the worst part of AB5 is the bill’s treatment of contractors as freeloaders and the insinuation that freelancers are not smart enough to make their own decisions about how to work. Liam’s work situation had been perfect for him—until the government told him that they knew better.

 

* These stories were written before Governor Gavin Newsom signed AB 2257 which created several exemptions to AB and may affect the entrepreneur. Even with the exemptions to AB 5, however, many Californians are still struggling as a result of the bill’s attack on independent contracting.