Warnings from California, the Harms of Attacking Entrepreneurs
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 Assembly Bill 5 *(see definition below) 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.
*Assembly Bill (AB) 5 was recently signed into law in California and has had devastating effects on independent contractors and freelancers in the Golden State. 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.