California’s Recent AB-5 Gig Law Hurts More than Helps.

Freelance writer, Robert Williams shared a terrific post this morning on MediaPost.com about the 35 post limit for freelance writers in California’s new gig law. The law, known as AB-5 is poorly thought out and doesn’t begin to take into account the unintended consequences of its construction and enforcement.

The law’s intended protections are for big gig economy contracted workers. The Ubers, Lyfts, and TaskRabbits of the world. I’ve failed to see the issue from day one. The definition of contract worker should continue to be an IRS designation. This information from the IRS site spells it out according to the law.

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“To better determine how to properly classify a worker, consider these three categories – Behavioral ControlFinancial Control and Relationship of the Parties.

Behavioral Control:  A worker is an employee when the business has the right to direct and control the work performed by the worker, even if that right is not exercised. Behavioral control categories are:

  • Type of instructions given, such as when and where to work, what tools to use or where to purchase supplies and services. Receiving the types of instructions in these examples may indicate a worker is an employee.
  • Degree of instruction, more detailed instructions may indicate that the worker is an employee. Less detailed instructions reflects less control, indicating that the worker is more likely an independent contractor.
  • Evaluation systems to measure the details of how the work is done points to an employee. Evaluation systems measuring just the end result point to either an independent contractor or an employee.
  • Training a worker on how to do the job — or periodic or on-going training about procedures and methods — is strong evidence that the worker is an employee. Independent contractors ordinarily use their own methods.

Financial Control: Does the business have a right to direct or control the financial and business aspects of the worker’s job? Consider:

  • Significant investment in the equipment the worker uses in working for someone else.
  • Unreimbursed expenses, independent contractors are more likely to incur unreimbursed expenses than employees.
  • Opportunity for profit or loss is often an indicator of an independent contractor.
  • Services available to the market. Independent contractors are generally free to seek out business opportunities.
  • Method of payment. An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time even when supplemented by a commission. However, independent contractors are most often paid for the job by a flat fee.

Relationship: The type of relationship depends upon how the worker and business perceive their interaction with one another. This includes:

  • Written contracts which describe the relationship the parties intend to create. Although a contract stating the worker is an employee or an independent contractor is not sufficient to determine the worker’s status.
  • Benefits. Businesses providing employee-type benefits, such as insurance, a pension plan, vacation pay or sick pay have employees. Businesses generally do not grant these benefits to independent contractors.
  • The permanency of the relationship is important. An expectation that the relationship will continue indefinitely, rather than for a specific project or period, is generally seen as evidence that the intent was to create an employer-employee relationship.
  • Services provided which are a key activity of the business. The extent to which services performed by the worker are seen as a key aspect of the regular business of the company.

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While it’s clear there are some possible grey areas in these guidelines, the primary focus of the contractor is that of freedom to pursue other areas of work.

In Robert Williams’ post, he shared the fact that he’d written approximately 1300 posts in the last year for publishers across the country. If the law were on the books in a dozen states, his work as a successful freelancer would be at risk.

I feel the same way. While I do appreciate the occasional W-2 relationship with a company who’s paying me for project work, the reality for me, and millions upon millions of others is this; at 59 years of age, many companies want my work, they don’t want the obligations of employing me at this age and as a consequence they find subtle ways to legally NOT hire me and others in my age range. I get it.

What will happen with more AB-5 type legislation? Slower growth, less innovation, less hiring and fewer pathways for workers to do flexible things that help them gain experience and earn extra money.

I have driven for both Lyft and Uber in years past. I’ve been a contract worker in sales, technology, and consulting. Those experiences delivered exactly what I bargained for at the time. With an employment agreement comes obligations. I’ve hired contractors and been a contractor. If you want the perks of an employee, don’t drive for Lyft or Uber. It will only take you about a week to figure out you’ll barely make it after all your expenses. That’s not the rideshare company’s fault. They don’t lie about their business model.

Prior to the industrial revolution, people worked as tradespeople. Entrepreneurship was not a term but that’s what everyone did. I’m certainly for a social safety net but forcing the adjustment of entire business models to penalize a perfectly adequate disclosure of the relationship between worker and employer is not the right path forward. I’ve seldom had a contract with a W-2 employer. In finance and tech, unless you’re at the top of the food chain, that type of relationship is not a common one. As a self-employed individual, by choice at times, I pursue the freedom to grow my own business. When I become an employee, the company is buying my time and my attention. This is not what a gig worker wants. They want the ability to pursue various activities. If they are pursuing life long security from these companies, they are just making bad choices.

When I work in a contractual relationship for someone, Uber and Lyft included, I never expected a benefits package from that work. I expected to be able to turn the app on and off at my discretion based on my needs and schedule. I didn’t expect a living wage nor did I anticipate it was possible.

I’m building platforms modeled after the ODesk and Upwork business models at present. I’m consulting with companies around Blue Ocean Strategy and growing a significant business in spirits and wine sampling that will run in great part on the strength of people whose primary employment is with someone else. I don’t want employees and won’t be misleading people into believing they’ll have all their needs met with my part-time offerings that include massive flexibility and the benefits from working independently from home.

Legislators need to find more reasonable ways to assist companies that may want to hire workers full time. If industries continue to shift to contract workers, and they will, machine learning and AI will reinforce these gig work trends. Legislators need not shut down the gig economy. They instead need to reinforce efforts that foster retraining, the growth of trades training or pursue making the industries growing the gig economy more profitable so workers have more opportunities to grow within those companies.

All of this is, candidly, an opinion piece. No harm if you don’t agree. The above has been my experience. If you’re a company wanting a contractor, you know what my expectations are. If you want to hire me as a W-2, I understand, your requirements for my attention and focus may be unique. It’s all business folks. As a worker, adding value to the employer’s mission and vision is still the obligation. As an employer, ethical and fair treatment with great communication about the role, the possibilities for a future, or lack thereof, is also your obligation.

Sherman G. Mohr is a Certified Blue Ocean Strategist, entrepreneur, and co-founder of a couple of companies. As you see, he also holds an opinion or two about the gig economy. He’s open to changing his mind if presented strong evidence to do so.

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