10 ms·

California’s Assembly Bill 5 came for me today

83 points by pgrote 7y ago

somebodythere 7y ago
Does AB5 apply to independent contractors living in California or businesses based out of California (or both)?
- tick_tock_tick 7y ago
  Both
stevespang 7y ago
"California’s legislature recently passed a law, Assembly Bill 5, codifying a California Supreme Court decision that classifies many independent contractors as full-time employees" . . . is that a giant sucking sound I hear as scores of independent businesses are forced to leave California because they can no longer endure the punishment of California government forcing more taxes and regulations on them ? In effect, classifying more and more independent contractors as employees as just a "backdoor parlor trick" for government to collect more employment taxes . . .
- pimlottc 7y ago
  > In effect, classifying more and more independent contractors as employees as just a "backdoor parlor trick" for government to collect more employment taxes . . . I'm not sure that matters, contractors still have to pay self-employment taxes.
- thrower123 7y ago
  At some point, the poor camel's back is going to give out and one of these thousand cuts is going to kill the golden goose. This is probably not the one, but piling up misguided policies decade after decade is destroying a state that should be a utopia.
  - bsder 7y ago
    And yet California is the 6th largest economy of the world and growing. And after purging most of the Republicans from the Assembly somehow hasn't had any budget issues. Imagine that. So, I'm still waiting for that inevitable exodus of Republicans from California so my housing costs will come down. I hear tell that Texas is your utopia. Could y'all hurry up and leave already?
    - deleted 7y ago
      [deleted]
    - _-david-_ 7y ago
      There is now record homelessness in California so maybe things aren't going to good. There is definitely budget issues. California's roads are close to the worst in the US. There are all sorts of issues with dams in the California. It is estimated to be $185 billion - $765 Billion (not sure why estimates are so broad) to fix all the infrastructure in California. If you add up all the debt by the California government and the various local governments it is over $1 trillion. The debt on pension alone is over $200 billion. If there are additional people leaving California it will be harder to pay off all the debt and pay for all the infrastructure.
    - thrower123 7y ago
      Yet there's enormous homeless problems, with feces and used hypodermics in the streets juxtaposed with trillion dollar tech headquarters. Outbreaks of plague, typhus and cholera. Rolling blackouts because infrastructure has been so poorly maintained. People that make five and six times the nationwide median salary living in their cars or packed in with roommates because the housing market is so broken. If it wasn't real, nobody would believe it.
    - Gibbon1 7y ago
      > And after purging most of the Republicans from the Assembly somehow hasn't had any budget issues. Imagine that. The Republican obstruction was the cause of California's continuing budget issues until the voters passed Proposition 25 which removed the 2/3 super majority requirement to pass a budget.
- freeopinion 7y ago
  I don't know California employment law and I don't know the specifics of AB5, but I have some experience with "backdoor parlor tricks." They are most often used by corporations looking to dodge various obligations. I have seen big tech companies outsource entire departments of their operation in a way that some schmo shows up to the same company every day and gets their marching orders from an employee of that company. They do this for years. But they are not employees, or temps. They work for some "contractor" whose only contract is with the company in question. Why doesn't SB Nation want to treat these "contractors" like employees? I don't care at all for California, but I have a hard time seeing them as the bad guy here. This editor claims many people do so much work for SB Nation that they can't fit into the small box carved out by AB5. Before I get too worked up, I'd ask for a definition of "small box." If you're putting in 30 hours a week for SB Nation, and they are your only contract, it's pretty clear that you are an employee and any other arrangement is a dodge.
  - foogazi 7y ago
    > If you're putting in 30 hours a week for SB Nation, and they are your only contract, it's pretty clear that you are an employee and any other arrangement is a dodge. Why does it matter? Why can’t citizens freely arrange their own working conditions? Why can’t the editor decide to work for who she wants? Because she lives in California
    - freeopinion 7y ago
      Because some poor family is struggling to eat so they send their 14 year old kid to hustle up some income. That kid gets exploited by their employer, but has to accept it because little sister and brother and mom are depending on them. Substitute 28 year old immigrant mom--or 55 year old grandpa--for 14 year old kid. The story repeats and repeats. When you're hungry you accept conditions you wouldn't otherwise. You may think this is fine and fitting. But California has decided there are limits to what is fine and fitting. Perhaps they ban child labor below age 12. Perhaps they insist that pregnant mothers can't be forced to lift more than 100kg. Maybe they bar disfigurement as acceptable corporate punishment for mistakes. Maybe they say you can't pay less than $100/hr. Some of this regulation may seem ridiculous to you. I'm guessing you've never been hungry and exploited. You and I can argue about whether $100/hr is the line between exploitation and entitlement. Should employers really be forced to pay for insurance? I hope, though, that you understand that most people think that employers do have certain obligations. And whether you believe that or not, the reality is that employers are regulated. So it creates an unlevel playing field when one company recognizes their employees and follows the rules, while another rushes them out the back door into a ditch whenever somebody that looks like a regulator shows up. I agree that two consenting adults should be able to negotiate terms of employment. I recognize that the power dynamic between parties is not always equitable. That's never been the case for me; perhaps it's never been the case for you. But it is the case for a lot of Californians. And I think that it is reasonable to apply rules to everybody instead of trying to figure out which employers are scummy and which aren't. I personally think my kid doesn't need to be paid a minimum wage, because I provide their food, roof, bed, insurance, etc. I want them to work for the experience. Nobody is really depending on the paycheck. But perhaps their coworker is depending desperately on that paycheck. We could regulate that only desperate people have to be paid a minimum wage, but that seems pretty unworkable. So, as it stands, my child's employer has to pay them minimum wage even though my child might be willing to negotiate for less. I'm ok blaming that on California, even though my child doesn't live or work in California.
- mdorazio 7y ago
  People have been saying some version of this about California economic policies for as long as I can remember, but the state somehow manages to keep attracting business and residents. First it was high taxes, then it was effectively banning non-competes, then it was raising minimum wages in major cities, now it's redefining contractor classification. I have to say that personally I don't see this going any differently than the previous times - businesses will continue to do just fine, some workers will get forced out of the state, others will take their places, and the net result will be a continuation of rising inequality [1], but not much else. [1] https://calmatters.org/california-divide/2019/10/income-inequality-is-on-the-rise-in-california-in-some-counties-the-disparities-are-extreme/ https://calmatters.org/california-divide/2019/10/income-ineq...
s17n 7y ago
I guess I'm a bit behind the conversation here but what exactly are the obligations the reclassifying contractors as employees would place on employers that are apparently impossible for SB Nation to fulfill?
- microcolonel 7y ago
  Well, first of all they'd have some obligation to ascertain that, and that alone won't come cheap. Effectively, Rebecca was likely more productive than the law allows, so they would need to provide her with ridiculously outsized benefits even though she is clearly a genuine independent contractor, and it's likely that other contributors were also too productive for the law. Though, and this bears repeating, even figuring that out is going to be very expensive.
- StanislavPetrov 7y ago
  Paying for health insurance, unemployment insurance and a host of other fees required of businesses for employees that aren't required for contractors.
  - deleted 7y ago
    [deleted]
  - tantalor 7y ago
    I think those only kick in if the number of employees is large enough. The article doesn't mention that detail so you may be right.
    - kasey_junk 7y ago
      SB Nation is run by Vox Media.
  - ars 7y ago
    Exactly. But you don't list the actual problem: Those benefits are based on working certain number of hours (because the benefits are fixed, they can not adjust them up and down based on hours worked). So basically what this law does is prevent people or employers from having flexibility in hours.
tick_tock_tick 7y ago
And thus the unintended but extremely predictable side effects start.
tantalor 7y ago
Some more discussion on alternatives they excluded would help. Like, what about part-time employment?
enjoyyourlife 7y ago
Why is the Editor-in-Chief being classified as an independent contractor?
- kasey_junk 7y ago
  Probably because they do piece work on their own time with flexible hours and no set schedule?
  - heavyset_go 7y ago
    Plenty of people who are employees have flexible hours and no set schedules.
    - kasey_junk 7y ago
      I’m not an AB 5 expert so don’t know what the qualifications are nor the exemptions but piece work is a classic marker of IC work. I don’t know that I’m for that but it’s common enough that changing it would of course cause strife.
    - pcmonk 7y ago
      This is SB Nation, they have >100 separate sites (one per sports team in the leagues they cover, plus some extras), and they each have an "editor-in-chief" which is specific to that site and manages that community. It's not always their day job, as in this case it isn't.
      - Retric 7y ago
        Part time employees can work 5 hours a week. That’s got nothing to do with the employe vs contractor decide. Unless your ‘contractors’ are doing the same thing for multiple clients over the year, their probably employees. If in doubt: https://www.oregon.gov/ODA/shared/Documents/Publications/NaturalResources/20FactorTestforIndependentContractors.pdf https://www.oregon.gov/ODA/shared/Documents/Publications/Nat...
  - tantalor 7y ago
taurath 7y ago
You can’t have employees in everything but name only. This this guy cheers on being a second class citizen in the labor world doesn’t help all the people with absolutely no job security, making worse pay and benefits for someone with connections to take 30-60% off the top of their work.
- gregd 7y ago
  I totally get and understand being scared at losing part of one's income, especially in place like California, but I agree with you. This is a step in the right direction and removes the ability for companies to continue to exploit 1099s.
  - gregd 7y ago
    Being downvoted for having an opinion? Good god people.
- susijdjdjxa 7y ago
  Those people also aren’t helped by having their employment taken away by this legislation. I have a friend with health issues that mean that he’s only able to work some of the time, and can’t predict when. Gig economy jobs are the first time that he’s been able to earn any income beyond his disability check. I hope this bill that tries to enforce the “normal” full-time employment relationship doesn’t deprive him of that.
  - deleted 7y ago
    [deleted]
  - tantalor 7y ago
    This person already has a full time job.
    - susijdjdjxa 7y ago
      Many of the freelancers impacted by this bill do not have a full time job, and this bill won’t give them that, it will just take what they have away.
newman8r 7y ago
Could these people just form an LLC to get around this? So you'd be acting as a business not an individual.
- gregd 7y ago
  That's exactly what they have to do and some are. However, forming and running an LLC can have it's own headaches depending on the type of business you're running. In some industries, running as an LLC would cost you more than you'd make as an IC.
  - jcims 7y ago
    Seems that the option of running as an IC is going to disappear for many, no?
    - gregd 7y ago
      There are few exceptions to the new law, and even the exceptions have to pass the Borello Test.
  - SkyPuncher 7y ago
    What industries does an LLC cost that much to run in? I've had one for years, it costs less than $250 annual to actually maintain the LLC.
    - kasey_junk 7y ago
      Piece work that doesn’t pay well. The tax complexity alone likely blows an SB Nation writers pay out of the water.
      - SkyPuncher 7y ago
        > Tax complexity As in Schedule C, on a standard tax form? Most online tax software can handle basic LLC income. Taxes only get complicated when you want to optimize the amount you owe. Depreciating assets, hiring, firing, claiming losses, etc.
jameslk 7y ago
I'm guessing we'll see more stories like this as the compliance departments of companies realize their new found liabilities. Especially once the lawyers start pumping out ads. I'm wondering how freelance networks such as Upwork, Fiverr, Toptal, and YC's own Gigster are going to react.
- drawkbox 7y ago
  Correct me if I am wrong but freelancing sites like Upwork, Fiverr, Toptal, and YC's own Gigster won't be affected. The sites only setup contractors with businesses on a project by project basis and meant to be temporary from the outset. This is meant to target companies that provide the services directly, hire people to work non-stop for them and in the same field/line of work or industry as the business. Also many freelancers already have LLCs or business so this is business level contracting corp to corp on these sites. Places like Uber/Lyft might also be able to argue they are a matchup service between drivers and passengers/travelers but it will probably change some payment aspects. Companies that provide food, cleaning, or services like janitorial and others that cheap out by making workers contractors are probably the biggest offenders of having people employed for years, providing that service, and cheaping out on contractor labor instead of employment. There will probably be lots of loopholes found as well over time, primarily when becoming a business rather than an individual working for these types of businesses.
  - jameslk 7y ago
    > Correct me if I am wrong but freelancing sites like Upwork, Fiverr, Toptal, and YC's own Gigster won't be affected. The sites only setup contractors with businesses on a project by project basis and meant to be temporary from the outset. This is incorrect. These companies do not simply set up contracts between companies and walk away and they aren't necessarily project based (especially for Upwork and Toptal). Nor are the contracts necessarily short term (some go on for years). These companies collect payments on behalf of the freelancers that work underneath them and some take an undisclosed percentage or added cut on top. I'm a member of Upwork, Toptal and Gigster, so I'm basing this off my actual experience. Reviewing AB5's ABC test, I see nothing that prevents these companies from failing at least one if not all the provisions (you need to be compliant in all 3): 1. the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact 2. the worker performs work that is outside the usual course of the hiring entity's business 3. the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity > Also many freelancers already have LLCs or business so this is business level contracting corp to corp on these sites. This is not necessarily the case. I definitely didn't have an LLC when I started freelancing. It costs $800/year in California and doesn't offer much benefit to a freelancer. Edit: It looks like in the case of Upwork, they're using the "professional services" exemption from AB5 and offering to W2 workers like a staffing agency: > And if you look at the text of the law there's various mentions about -- around professional services being excluded. So that's one component of it. The second component of it is the fact that we actually also are payrolling services. So we would -- we call it freelancing but some of the work in Upwork is under a 1099 some of the work on Upwork is done through a W-2. Through our product offering we have called Upwork Payroll. https://www.fool.com/earnings/call-transcripts/2019/11/07/upwork-inc-upwk-q3-2019-earnings-call-transcript.aspx https://www.fool.com/earnings/call-transcripts/2019/11/07/up...
DoreenMichele 7y ago
That new law makes it impossible for us to continue with our current California team site structure because it restricts contractors from producing more than 35 written content “submissions” per year. (From a link found in her first paragraph: https://www.sbnation.com/2019/12/16/21024100/thank-you-california https://www.sbnation.com/2019/12/16/21024100/thank-you-calif...) A lot of writers do it part-time, have other sources of income, have medical coverage and the like via other paths and do contract writing by choice because it makes sense for them. This law seems to be throwing the baby out with the bath water. /2 cents from someone who does writing as a 1099 worker. Thankfully, this doesn't impact me because I no longer live in California.
vector_spaces 7y ago
The effects of this law are complicated -- I can't say that it's clearly a net boon or a net fail to me. While I sincerely empathize with Lawson here, I can name off the top of my head a dozen restaurants, several grocery stores, and a handful of B2C startups in the Bay Area that have historically misclassifed most of their cooks, dishwashers, waiters, cashiers, stockers, warehouse, and shipping & receiving staff as independent contractors. Many of those misclassified employees would rather[0] be employees with basic protections such as overtime pay + some degree of protection in the event that they are injured while working. At the same time, I know of some folks who are completely out of work as a result. [0] I know because I asked some of them, and was one of them in a past life
- NotSammyHagar 7y ago
  Every worker should have those basic protections. There are some people who are fortunate like this writer to have a real job and do not need their part-time gig. But there are way more people who could benefit from those protections. I'm a software engineer so I'm already pretty fortunate. Should we change laws so that we somehow hire more engrs, maybe pay less employment taxes or some such thing? Probably not. And there are plenty of people even in software engineering who lose their jobs and can't find another one for whatever reason, they'd benefit from stronger workplace protections. Workplace protections are a good idea, just like higher minimum wages; it's because raising the minimum bar is better because it helps those at the bottom. Even if a privileged person could take on a part-time passion project and now they can't.
  - deleted 7y ago
    [deleted]
  - vector_spaces 7y ago
    I hear what you're saying, particularly about the author and her passion project. But there are some folks who aren't privileged by any stretch of the imagination who are probably going to experience some income loss or instability as legislation like this become more common. See [1] for an example, and also consider the situation for undocumented workers. So it's complicated! This will probably be a good thing for most workers, but it'll likely have nasty side effects when it comes to the most marginalized and vulnerable workers [1] https://www.sfexaminer.com/news/new-rules-for-contractors-have-unexpected-consequences-for-the-citys-strip-clubs/ https://www.sfexaminer.com/news/new-rules-for-contractors-ha...
SkyPuncher 7y ago
Anybody else think it's interesting that this article is so focused on AB5 - and almost completely ignoring her employer's responsibility in this. What's blocking her from being hired in a properly classified position on a part time basis?
- gregd 7y ago
  Because companies complain that it adds 20% - 30% to their labor costs.
  - toomuchtodo 7y ago
    More accurately, the loophole they've been using to obtain a labor discount (employee misclassification) has been removed.
    - ars 7y ago
      There is no loophole, and there is no labor discount. This is inaccurate. You are speaking of the Employer portion of social security tax (aka Self Employment Tax). All the happens when switching from contractor to employee is the salary goes down, so the final cost to the employer is identical. (And the income of the employee is also identical.) A contractor vs employee is about flexibility on hours. An employee expects a certain number of hours per year - all the benefits are based on that. A contractor has no such expectation, so they have no benefits (because otherwise you would have to scale the benefits up and down constantly based on actual hours worked).
      - gregd 7y ago
        Going from Contractor to Employee status adds 20% - 30% in labor costs. Things like Workers Comp, PTO, unemployment insurance, etc. that companies are forced to pay. There is indeed a "loophole" or labor discount with ICs.
        ars 7y ago
pcmonk 7y ago
For another perspective, SB Nation's announcement: https://www.sbnation.com/2019/12/16/21024100/thank-you-california https://www.sbnation.com/2019/12/16/21024100/thank-you-calif... Notably, this thread is full of people blaming SB Nation for not converting IC's to employees, which is exactly what they say they're going to do, though not everyone will end up with a job at the end of it.
- iudqnolq 7y ago
  You're probably right, but I see nothing about them not hiring some people in the announcement. They do say some people will probably not want to leave their current jobs. They also say everyone will get some amount of money for notice. Sounds overall pretty good of them, if they actually do it
drawkbox 7y ago
California does not recognize non-competes [1][2]. California is also a nebula of innovation and great companies because of it, with creator/developer freedom. California will do things for labor other states won't, like not allowing non-competes and AB5. Will there be some situations that aren't ideal? Sure. Will it ultimately help more people not get taken advantage of in the labor market who need it most? Yes indeed. The 'editor-in-chief' as a contractor seems like stretch reason to get offended by AB5. They could easily be a part-time employee, deny all benefits and nothing would change. But AB5 helps the people that don't have the flexibility of OP. > California AB5 'came for me today' > As with many of my colleagues today, because I live in California, I was just told that I can no longer hold a paid position with SB Nation. This means that I will be forced to step down as Editor-in-Chief of Mavs Moneyball as of March 31 > For those who don’t know, California’s legislature recently passed a law, Assembly Bill 5, codifying a California Supreme Court decision that classifies many independent contractors as full-time employees. While there is a small carve-out in the statute that allows for paid writers or editors to continue to produce a very limited amount of content per company, it’s not nearly enough, and it would be hard for me or most of my colleagues to fit in that small box. The OP makes it sounds like California kicked in the door and ripped their keyboard from their hand and never allowing them to work for the publisher. She can easily be part-time, start a business for it and contract, as an 'editor-in-chief' you'd think that is more involved. With the limit of 30 articles a month is about 3 per month and that is per company, other writers that write for many publishers will be fully fine with this. I doubt most writers that write more than 3 articles a month would mind if they got extra protections, the editor-in-chief is a different thing entirely. I can understand why businesses are mad about this but not labor or contractors. California makes it easier for contractors to work by not allowing non-competes [1][2]. Non-competes are the most anti-American, anti-business, anti-innovation, anti-labor things in America. Support California taking a stand against the powerful and authoritarians that want essential slaves in the worst form of this. I have no doubt that SCOTUS will eventually have to deal with non-competes. With how a conservative leaning SCOTUS sided on the favor of business with arbitration, and denying access to the legal system for many, it doesn't look good [3]. Having California as an example of a non-compete state is great to have in that it is innovative and contractors don't have to deal with that in California. I have to fight non-competes in every project that isn't based in California. Lots of these companies want developers to sign a 2-year non-compete for a 3-6 month project which is completely asinine. California ultimately does more for workers and low/middle class than any other state as well as business being a competitive and innovative magnet. With a market this large they are using their leverage for good. But there will always be the haters and FUD from big business and occasionally some that disagree. Ultimately these policies are better for America and labor. [1] https://www.upcounsel.com/non-compete-california https://www.upcounsel.com/non-compete-california [2] https://en.wikipedia.org/wiki/Non-compete_clause#California https://en.wikipedia.org/wiki/Non-compete_clause#California [3] https://www.cnbc.com/2019/04/24/scotus-conservatives-limit-class-arbitration-in-divided-decision.html https://www.cnbc.com/2019/04/24/scotus-conservatives-limit-c...
kasey_junk 7y ago
Were contractors covered by the Vox Media Union?
BooneJS 7y ago
Complex systems are, in fact, complex.
big_chungus 7y ago
While I was a student, I was employed, part-time, as a contractor doing software development. It was incredibly beneficial; my employer was very flexible and I worked as I had time. This paid a significant portion of my college expenses and gave me invaluable work experience without which I would not be where I am today. I would have a worse job and more debt. This California law is ridiculous. Under it, I could not hold such a position. It is not the place of the state to dictate the terms of a private contract between two consenting parties.
- watwatinthewat 7y ago
  Why does this prevent that experience from happening? That's a genuine question, as I perhaps/probably don't know enough about the law to get it.
- dariusj18 7y ago
  I'm not sure what this law would change about being able to work part time with flexible hours. Could you elaborate?
  - big_chungus 7y ago
    Sure. The new bill establishes that an employer must demonstrate the following requirements to hire someone as a contractor (quoting from the bill): * the person is free from the control and direction of the hiring entity in connection with the performance of the work * the person performs work that is outside the usual course of the hiring entity’s business * the person is customarily engaged in an independently established trade, occupation, or business I wouldn't have been even close to meeting those. I had some freedom about how the work was performed, so number one is a maybe. I was doing software development for a software development company, so numbers two and three are hard "no"s. As a college student, I didn't care about insurance, or vacation time, or being a full employee. I came to a mutually-beneficial agreement with my employer, and this bill would have prevented that. Also of note: California bans un-paid internships in the "free labor" sense. While this sounds good on the surface, it's not. I held internships in middle and high school that were awesome experience when I had time to burn, and those proved incredibly helpful in landing later paid internships, contract work, college acceptances, and salaried jobs. They were incredibly helpful, and I learned a ton, but I couldn't have done that were I a resident of California. This bill is written to target the gig economy. Many college students I know pay make good money doing gig economy work. And many working-class teens I know who typically work fast food can now use gig economy shifts to fill in when they can't get shifts lined up working fast food or other typical jobs. This bill is awful for almost everyone, because it removes opportunities without providing alternative ones. The state does a great job of taking them away, and a comparatively-horrible job of creating them. Were I a teen-age Californian high-schooler, I'd now be looking at working fast food rather than software development.
vadym909 7y ago
Consider yourself collateral damage- just like full-time employees were when companies decided to hire ICs and not pay them benefits. The real problem unfortunately lies in the fact that the Govt decided the best way to provide people benefits was through the employer.
purplezooey 7y ago
"...not work with California-based independent contractors ... I don’t blame them at all." Wait a minute. Yes, blame them. This is a stance against paying benefits and sustainable wages for employees.
- Jamwinner 7y ago
  Meet globlization. This is the issue.
RiOuseR 7y ago
Here we go. A law meant to protect employees is going to lead to more unemployment. You see it with SF wait staff laws and now more and more places either don't hire wait staff or don't hire as many as they used to. The state is off its rocker yet again
dmode 7y ago
There will be some unintended consequences of this law, and I am pretty sure the legislature will adjust and evolve. But I find it weird that there are businesses who just wants to get way by outsourcing the core part of the business to contractors. What is the point of employment law then ? Supercuts is one big example of that (and they got an exemption from AB 5).
scarejunba 7y ago
The real problem is that California should clearly have just added these guys to the exclusion list (which is already pretty massive) considering there's such a large fungible labour force in this market.
JohnClark1337 7y ago
Keep up the good work California

83 points by pgrote 7y ago

somebodythere 7y ago

Does AB5 apply to independent contractors living in California or businesses based out of California (or both)?

tick_tock_tick 7y ago
Both

stevespang 7y ago

"California’s legislature recently passed a law, Assembly Bill 5, codifying a California Supreme Court decision that classifies many independent contractors as full-time employees" . . . is that a giant sucking sound I hear as scores of independent businesses are forced to leave California because they can no longer endure the punishment of California government forcing more taxes and regulations on them ? In effect, classifying more and more independent contractors as employees as just a "backdoor parlor trick" for government to collect more employment taxes . . .

pimlottc 7y ago
> In effect, classifying more and more independent contractors as employees as just a "backdoor parlor trick" for government to collect more employment taxes . . . I'm not sure that matters, contractors still have to pay self-employment taxes.
thrower123 7y ago
At some point, the poor camel's back is going to give out and one of these thousand cuts is going to kill the golden goose. This is probably not the one, but piling up misguided policies decade after decade is destroying a state that should be a utopia.
- bsder 7y ago
  And yet California is the 6th largest economy of the world and growing. And after purging most of the Republicans from the Assembly somehow hasn't had any budget issues. Imagine that. So, I'm still waiting for that inevitable exodus of Republicans from California so my housing costs will come down. I hear tell that Texas is your utopia. Could y'all hurry up and leave already?
  - deleted 7y ago
    [deleted]
  - _-david-_ 7y ago
    There is now record homelessness in California so maybe things aren't going to good. There is definitely budget issues. California's roads are close to the worst in the US. There are all sorts of issues with dams in the California. It is estimated to be $185 billion - $765 Billion (not sure why estimates are so broad) to fix all the infrastructure in California. If you add up all the debt by the California government and the various local governments it is over $1 trillion. The debt on pension alone is over $200 billion. If there are additional people leaving California it will be harder to pay off all the debt and pay for all the infrastructure.
  - thrower123 7y ago
    Yet there's enormous homeless problems, with feces and used hypodermics in the streets juxtaposed with trillion dollar tech headquarters. Outbreaks of plague, typhus and cholera. Rolling blackouts because infrastructure has been so poorly maintained. People that make five and six times the nationwide median salary living in their cars or packed in with roommates because the housing market is so broken. If it wasn't real, nobody would believe it.
  - Gibbon1 7y ago
    > And after purging most of the Republicans from the Assembly somehow hasn't had any budget issues. Imagine that. The Republican obstruction was the cause of California's continuing budget issues until the voters passed Proposition 25 which removed the 2/3 super majority requirement to pass a budget.
freeopinion 7y ago
I don't know California employment law and I don't know the specifics of AB5, but I have some experience with "backdoor parlor tricks." They are most often used by corporations looking to dodge various obligations. I have seen big tech companies outsource entire departments of their operation in a way that some schmo shows up to the same company every day and gets their marching orders from an employee of that company. They do this for years. But they are not employees, or temps. They work for some "contractor" whose only contract is with the company in question. Why doesn't SB Nation want to treat these "contractors" like employees? I don't care at all for California, but I have a hard time seeing them as the bad guy here. This editor claims many people do so much work for SB Nation that they can't fit into the small box carved out by AB5. Before I get too worked up, I'd ask for a definition of "small box." If you're putting in 30 hours a week for SB Nation, and they are your only contract, it's pretty clear that you are an employee and any other arrangement is a dodge.
- foogazi 7y ago
  > If you're putting in 30 hours a week for SB Nation, and they are your only contract, it's pretty clear that you are an employee and any other arrangement is a dodge. Why does it matter? Why can’t citizens freely arrange their own working conditions? Why can’t the editor decide to work for who she wants? Because she lives in California
  - freeopinion 7y ago
    Because some poor family is struggling to eat so they send their 14 year old kid to hustle up some income. That kid gets exploited by their employer, but has to accept it because little sister and brother and mom are depending on them. Substitute 28 year old immigrant mom--or 55 year old grandpa--for 14 year old kid. The story repeats and repeats. When you're hungry you accept conditions you wouldn't otherwise. You may think this is fine and fitting. But California has decided there are limits to what is fine and fitting. Perhaps they ban child labor below age 12. Perhaps they insist that pregnant mothers can't be forced to lift more than 100kg. Maybe they bar disfigurement as acceptable corporate punishment for mistakes. Maybe they say you can't pay less than $100/hr. Some of this regulation may seem ridiculous to you. I'm guessing you've never been hungry and exploited. You and I can argue about whether $100/hr is the line between exploitation and entitlement. Should employers really be forced to pay for insurance? I hope, though, that you understand that most people think that employers do have certain obligations. And whether you believe that or not, the reality is that employers are regulated. So it creates an unlevel playing field when one company recognizes their employees and follows the rules, while another rushes them out the back door into a ditch whenever somebody that looks like a regulator shows up. I agree that two consenting adults should be able to negotiate terms of employment. I recognize that the power dynamic between parties is not always equitable. That's never been the case for me; perhaps it's never been the case for you. But it is the case for a lot of Californians. And I think that it is reasonable to apply rules to everybody instead of trying to figure out which employers are scummy and which aren't. I personally think my kid doesn't need to be paid a minimum wage, because I provide their food, roof, bed, insurance, etc. I want them to work for the experience. Nobody is really depending on the paycheck. But perhaps their coworker is depending desperately on that paycheck. We could regulate that only desperate people have to be paid a minimum wage, but that seems pretty unworkable. So, as it stands, my child's employer has to pay them minimum wage even though my child might be willing to negotiate for less. I'm ok blaming that on California, even though my child doesn't live or work in California.
mdorazio 7y ago
People have been saying some version of this about California economic policies for as long as I can remember, but the state somehow manages to keep attracting business and residents. First it was high taxes, then it was effectively banning non-competes, then it was raising minimum wages in major cities, now it's redefining contractor classification. I have to say that personally I don't see this going any differently than the previous times - businesses will continue to do just fine, some workers will get forced out of the state, others will take their places, and the net result will be a continuation of rising inequality [1], but not much else. [1] https://calmatters.org/california-divide/2019/10/income-inequality-is-on-the-rise-in-california-in-some-counties-the-disparities-are-extreme/ https://calmatters.org/california-divide/2019/10/income-ineq...

s17n 7y ago

I guess I'm a bit behind the conversation here but what exactly are the obligations the reclassifying contractors as employees would place on employers that are apparently impossible for SB Nation to fulfill?

microcolonel 7y ago
Well, first of all they'd have some obligation to ascertain that, and that alone won't come cheap. Effectively, Rebecca was likely more productive than the law allows, so they would need to provide her with ridiculously outsized benefits even though she is clearly a genuine independent contractor, and it's likely that other contributors were also too productive for the law. Though, and this bears repeating, even figuring that out is going to be very expensive.
StanislavPetrov 7y ago
Paying for health insurance, unemployment insurance and a host of other fees required of businesses for employees that aren't required for contractors.
- deleted 7y ago
  [deleted]
- tantalor 7y ago
  I think those only kick in if the number of employees is large enough. The article doesn't mention that detail so you may be right.
  - kasey_junk 7y ago
    SB Nation is run by Vox Media.
- ars 7y ago
  Exactly. But you don't list the actual problem: Those benefits are based on working certain number of hours (because the benefits are fixed, they can not adjust them up and down based on hours worked). So basically what this law does is prevent people or employers from having flexibility in hours.

tick_tock_tick 7y ago

And thus the unintended but extremely predictable side effects start.

tantalor 7y ago

Some more discussion on alternatives they excluded would help. Like, what about part-time employment?

enjoyyourlife 7y ago

Why is the Editor-in-Chief being classified as an independent contractor?

kasey_junk 7y ago
Probably because they do piece work on their own time with flexible hours and no set schedule?
- heavyset_go 7y ago
  Plenty of people who are employees have flexible hours and no set schedules.
  - kasey_junk 7y ago
    I’m not an AB 5 expert so don’t know what the qualifications are nor the exemptions but piece work is a classic marker of IC work. I don’t know that I’m for that but it’s common enough that changing it would of course cause strife.
  - pcmonk 7y ago
    This is SB Nation, they have >100 separate sites (one per sports team in the leagues they cover, plus some extras), and they each have an "editor-in-chief" which is specific to that site and manages that community. It's not always their day job, as in this case it isn't.
    - Retric 7y ago
      Part time employees can work 5 hours a week. That’s got nothing to do with the employe vs contractor decide. Unless your ‘contractors’ are doing the same thing for multiple clients over the year, their probably employees. If in doubt: https://www.oregon.gov/ODA/shared/Documents/Publications/NaturalResources/20FactorTestforIndependentContractors.pdf https://www.oregon.gov/ODA/shared/Documents/Publications/Nat...
- tantalor 7y ago

taurath 7y ago

You can’t have employees in everything but name only. This this guy cheers on being a second class citizen in the labor world doesn’t help all the people with absolutely no job security, making worse pay and benefits for someone with connections to take 30-60% off the top of their work.

gregd 7y ago
I totally get and understand being scared at losing part of one's income, especially in place like California, but I agree with you. This is a step in the right direction and removes the ability for companies to continue to exploit 1099s.
- gregd 7y ago
  Being downvoted for having an opinion? Good god people.
susijdjdjxa 7y ago
Those people also aren’t helped by having their employment taken away by this legislation. I have a friend with health issues that mean that he’s only able to work some of the time, and can’t predict when. Gig economy jobs are the first time that he’s been able to earn any income beyond his disability check. I hope this bill that tries to enforce the “normal” full-time employment relationship doesn’t deprive him of that.
- deleted 7y ago
  [deleted]
- tantalor 7y ago
  This person already has a full time job.
  - susijdjdjxa 7y ago
    Many of the freelancers impacted by this bill do not have a full time job, and this bill won’t give them that, it will just take what they have away.

newman8r 7y ago

Could these people just form an LLC to get around this? So you'd be acting as a business not an individual.

gregd 7y ago
That's exactly what they have to do and some are. However, forming and running an LLC can have it's own headaches depending on the type of business you're running. In some industries, running as an LLC would cost you more than you'd make as an IC.
- jcims 7y ago
  Seems that the option of running as an IC is going to disappear for many, no?
  - gregd 7y ago
    There are few exceptions to the new law, and even the exceptions have to pass the Borello Test.
- SkyPuncher 7y ago
  What industries does an LLC cost that much to run in? I've had one for years, it costs less than $250 annual to actually maintain the LLC.
  - kasey_junk 7y ago
    Piece work that doesn’t pay well. The tax complexity alone likely blows an SB Nation writers pay out of the water.
    - SkyPuncher 7y ago
      > Tax complexity As in Schedule C, on a standard tax form? Most online tax software can handle basic LLC income. Taxes only get complicated when you want to optimize the amount you owe. Depreciating assets, hiring, firing, claiming losses, etc.

jameslk 7y ago

I'm guessing we'll see more stories like this as the compliance departments of companies realize their new found liabilities. Especially once the lawyers start pumping out ads. I'm wondering how freelance networks such as Upwork, Fiverr, Toptal, and YC's own Gigster are going to react.

drawkbox 7y ago
Correct me if I am wrong but freelancing sites like Upwork, Fiverr, Toptal, and YC's own Gigster won't be affected. The sites only setup contractors with businesses on a project by project basis and meant to be temporary from the outset. This is meant to target companies that provide the services directly, hire people to work non-stop for them and in the same field/line of work or industry as the business. Also many freelancers already have LLCs or business so this is business level contracting corp to corp on these sites. Places like Uber/Lyft might also be able to argue they are a matchup service between drivers and passengers/travelers but it will probably change some payment aspects. Companies that provide food, cleaning, or services like janitorial and others that cheap out by making workers contractors are probably the biggest offenders of having people employed for years, providing that service, and cheaping out on contractor labor instead of employment. There will probably be lots of loopholes found as well over time, primarily when becoming a business rather than an individual working for these types of businesses.
- jameslk 7y ago
  > Correct me if I am wrong but freelancing sites like Upwork, Fiverr, Toptal, and YC's own Gigster won't be affected. The sites only setup contractors with businesses on a project by project basis and meant to be temporary from the outset. This is incorrect. These companies do not simply set up contracts between companies and walk away and they aren't necessarily project based (especially for Upwork and Toptal). Nor are the contracts necessarily short term (some go on for years). These companies collect payments on behalf of the freelancers that work underneath them and some take an undisclosed percentage or added cut on top. I'm a member of Upwork, Toptal and Gigster, so I'm basing this off my actual experience. Reviewing AB5's ABC test, I see nothing that prevents these companies from failing at least one if not all the provisions (you need to be compliant in all 3): 1. the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact 2. the worker performs work that is outside the usual course of the hiring entity's business 3. the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity > Also many freelancers already have LLCs or business so this is business level contracting corp to corp on these sites. This is not necessarily the case. I definitely didn't have an LLC when I started freelancing. It costs $800/year in California and doesn't offer much benefit to a freelancer. Edit: It looks like in the case of Upwork, they're using the "professional services" exemption from AB5 and offering to W2 workers like a staffing agency: > And if you look at the text of the law there's various mentions about -- around professional services being excluded. So that's one component of it. The second component of it is the fact that we actually also are payrolling services. So we would -- we call it freelancing but some of the work in Upwork is under a 1099 some of the work on Upwork is done through a W-2. Through our product offering we have called Upwork Payroll. https://www.fool.com/earnings/call-transcripts/2019/11/07/upwork-inc-upwk-q3-2019-earnings-call-transcript.aspx https://www.fool.com/earnings/call-transcripts/2019/11/07/up...

DoreenMichele 7y ago

That new law makes it impossible for us to continue with our current California team site structure because it restricts contractors from producing more than 35 written content “submissions” per year. (From a link found in her first paragraph: https://www.sbnation.com/2019/12/16/21024100/thank-you-california https://www.sbnation.com/2019/12/16/21024100/thank-you-calif...) A lot of writers do it part-time, have other sources of income, have medical coverage and the like via other paths and do contract writing by choice because it makes sense for them. This law seems to be throwing the baby out with the bath water. /2 cents from someone who does writing as a 1099 worker. Thankfully, this doesn't impact me because I no longer live in California.

vector_spaces 7y ago

The effects of this law are complicated -- I can't say that it's clearly a net boon or a net fail to me. While I sincerely empathize with Lawson here, I can name off the top of my head a dozen restaurants, several grocery stores, and a handful of B2C startups in the Bay Area that have historically misclassifed most of their cooks, dishwashers, waiters, cashiers, stockers, warehouse, and shipping & receiving staff as independent contractors. Many of those misclassified employees would rather[0] be employees with basic protections such as overtime pay + some degree of protection in the event that they are injured while working. At the same time, I know of some folks who are completely out of work as a result. [0] I know because I asked some of them, and was one of them in a past life

NotSammyHagar 7y ago
Every worker should have those basic protections. There are some people who are fortunate like this writer to have a real job and do not need their part-time gig. But there are way more people who could benefit from those protections. I'm a software engineer so I'm already pretty fortunate. Should we change laws so that we somehow hire more engrs, maybe pay less employment taxes or some such thing? Probably not. And there are plenty of people even in software engineering who lose their jobs and can't find another one for whatever reason, they'd benefit from stronger workplace protections. Workplace protections are a good idea, just like higher minimum wages; it's because raising the minimum bar is better because it helps those at the bottom. Even if a privileged person could take on a part-time passion project and now they can't.
- deleted 7y ago
  [deleted]
- vector_spaces 7y ago
  I hear what you're saying, particularly about the author and her passion project. But there are some folks who aren't privileged by any stretch of the imagination who are probably going to experience some income loss or instability as legislation like this become more common. See [1] for an example, and also consider the situation for undocumented workers. So it's complicated! This will probably be a good thing for most workers, but it'll likely have nasty side effects when it comes to the most marginalized and vulnerable workers [1] https://www.sfexaminer.com/news/new-rules-for-contractors-have-unexpected-consequences-for-the-citys-strip-clubs/ https://www.sfexaminer.com/news/new-rules-for-contractors-ha...

SkyPuncher 7y ago

Anybody else think it's interesting that this article is so focused on AB5 - and almost completely ignoring her employer's responsibility in this. What's blocking her from being hired in a properly classified position on a part time basis?

gregd 7y ago
Because companies complain that it adds 20% - 30% to their labor costs.
- toomuchtodo 7y ago
  More accurately, the loophole they've been using to obtain a labor discount (employee misclassification) has been removed.
  - ars 7y ago
    There is no loophole, and there is no labor discount. This is inaccurate. You are speaking of the Employer portion of social security tax (aka Self Employment Tax). All the happens when switching from contractor to employee is the salary goes down, so the final cost to the employer is identical. (And the income of the employee is also identical.) A contractor vs employee is about flexibility on hours. An employee expects a certain number of hours per year - all the benefits are based on that. A contractor has no such expectation, so they have no benefits (because otherwise you would have to scale the benefits up and down constantly based on actual hours worked).
    - gregd 7y ago
      Going from Contractor to Employee status adds 20% - 30% in labor costs. Things like Workers Comp, PTO, unemployment insurance, etc. that companies are forced to pay. There is indeed a "loophole" or labor discount with ICs.
      - ars 7y ago

pcmonk 7y ago

For another perspective, SB Nation's announcement: https://www.sbnation.com/2019/12/16/21024100/thank-you-california https://www.sbnation.com/2019/12/16/21024100/thank-you-calif... Notably, this thread is full of people blaming SB Nation for not converting IC's to employees, which is exactly what they say they're going to do, though not everyone will end up with a job at the end of it.

iudqnolq 7y ago
You're probably right, but I see nothing about them not hiring some people in the announcement. They do say some people will probably not want to leave their current jobs. They also say everyone will get some amount of money for notice. Sounds overall pretty good of them, if they actually do it

drawkbox 7y ago

California does not recognize non-competes [1][2]. California is also a nebula of innovation and great companies because of it, with creator/developer freedom. California will do things for labor other states won't, like not allowing non-competes and AB5. Will there be some situations that aren't ideal? Sure. Will it ultimately help more people not get taken advantage of in the labor market who need it most? Yes indeed. The 'editor-in-chief' as a contractor seems like stretch reason to get offended by AB5. They could easily be a part-time employee, deny all benefits and nothing would change. But AB5 helps the people that don't have the flexibility of OP. > California AB5 'came for me today' > As with many of my colleagues today, because I live in California, I was just told that I can no longer hold a paid position with SB Nation. This means that I will be forced to step down as Editor-in-Chief of Mavs Moneyball as of March 31 > For those who don’t know, California’s legislature recently passed a law, Assembly Bill 5, codifying a California Supreme Court decision that classifies many independent contractors as full-time employees. While there is a small carve-out in the statute that allows for paid writers or editors to continue to produce a very limited amount of content per company, it’s not nearly enough, and it would be hard for me or most of my colleagues to fit in that small box. The OP makes it sounds like California kicked in the door and ripped their keyboard from their hand and never allowing them to work for the publisher. She can easily be part-time, start a business for it and contract, as an 'editor-in-chief' you'd think that is more involved. With the limit of 30 articles a month is about 3 per month and that is per company, other writers that write for many publishers will be fully fine with this. I doubt most writers that write more than 3 articles a month would mind if they got extra protections, the editor-in-chief is a different thing entirely. I can understand why businesses are mad about this but not labor or contractors. California makes it easier for contractors to work by not allowing non-competes [1][2]. Non-competes are the most anti-American, anti-business, anti-innovation, anti-labor things in America. Support California taking a stand against the powerful and authoritarians that want essential slaves in the worst form of this. I have no doubt that SCOTUS will eventually have to deal with non-competes. With how a conservative leaning SCOTUS sided on the favor of business with arbitration, and denying access to the legal system for many, it doesn't look good [3]. Having California as an example of a non-compete state is great to have in that it is innovative and contractors don't have to deal with that in California. I have to fight non-competes in every project that isn't based in California. Lots of these companies want developers to sign a 2-year non-compete for a 3-6 month project which is completely asinine. California ultimately does more for workers and low/middle class than any other state as well as business being a competitive and innovative magnet. With a market this large they are using their leverage for good. But there will always be the haters and FUD from big business and occasionally some that disagree. Ultimately these policies are better for America and labor. [1] https://www.upcounsel.com/non-compete-california https://www.upcounsel.com/non-compete-california [2] https://en.wikipedia.org/wiki/Non-compete_clause#California https://en.wikipedia.org/wiki/Non-compete_clause#California [3] https://www.cnbc.com/2019/04/24/scotus-conservatives-limit-class-arbitration-in-divided-decision.html https://www.cnbc.com/2019/04/24/scotus-conservatives-limit-c...

kasey_junk 7y ago

Were contractors covered by the Vox Media Union?

BooneJS 7y ago

Complex systems are, in fact, complex.

big_chungus 7y ago

While I was a student, I was employed, part-time, as a contractor doing software development. It was incredibly beneficial; my employer was very flexible and I worked as I had time. This paid a significant portion of my college expenses and gave me invaluable work experience without which I would not be where I am today. I would have a worse job and more debt. This California law is ridiculous. Under it, I could not hold such a position. It is not the place of the state to dictate the terms of a private contract between two consenting parties.

watwatinthewat 7y ago
Why does this prevent that experience from happening? That's a genuine question, as I perhaps/probably don't know enough about the law to get it.
dariusj18 7y ago
I'm not sure what this law would change about being able to work part time with flexible hours. Could you elaborate?
- big_chungus 7y ago
  Sure. The new bill establishes that an employer must demonstrate the following requirements to hire someone as a contractor (quoting from the bill): * the person is free from the control and direction of the hiring entity in connection with the performance of the work * the person performs work that is outside the usual course of the hiring entity’s business * the person is customarily engaged in an independently established trade, occupation, or business I wouldn't have been even close to meeting those. I had some freedom about how the work was performed, so number one is a maybe. I was doing software development for a software development company, so numbers two and three are hard "no"s. As a college student, I didn't care about insurance, or vacation time, or being a full employee. I came to a mutually-beneficial agreement with my employer, and this bill would have prevented that. Also of note: California bans un-paid internships in the "free labor" sense. While this sounds good on the surface, it's not. I held internships in middle and high school that were awesome experience when I had time to burn, and those proved incredibly helpful in landing later paid internships, contract work, college acceptances, and salaried jobs. They were incredibly helpful, and I learned a ton, but I couldn't have done that were I a resident of California. This bill is written to target the gig economy. Many college students I know pay make good money doing gig economy work. And many working-class teens I know who typically work fast food can now use gig economy shifts to fill in when they can't get shifts lined up working fast food or other typical jobs. This bill is awful for almost everyone, because it removes opportunities without providing alternative ones. The state does a great job of taking them away, and a comparatively-horrible job of creating them. Were I a teen-age Californian high-schooler, I'd now be looking at working fast food rather than software development.

vadym909 7y ago

Consider yourself collateral damage- just like full-time employees were when companies decided to hire ICs and not pay them benefits. The real problem unfortunately lies in the fact that the Govt decided the best way to provide people benefits was through the employer.

purplezooey 7y ago

"...not work with California-based independent contractors ... I don’t blame them at all." Wait a minute. Yes, blame them. This is a stance against paying benefits and sustainable wages for employees.

Jamwinner 7y ago
Meet globlization. This is the issue.

RiOuseR 7y ago

Here we go. A law meant to protect employees is going to lead to more unemployment. You see it with SF wait staff laws and now more and more places either don't hire wait staff or don't hire as many as they used to. The state is off its rocker yet again

dmode 7y ago

There will be some unintended consequences of this law, and I am pretty sure the legislature will adjust and evolve. But I find it weird that there are businesses who just wants to get way by outsourcing the core part of the business to contractors. What is the point of employment law then ? Supercuts is one big example of that (and they got an exemption from AB 5).

scarejunba 7y ago

The real problem is that California should clearly have just added these guys to the exclusion list (which is already pretty massive) considering there's such a large fungible labour force in this market.

JohnClark1337 7y ago

Keep up the good work California