Coronavirus is supercharging the fight over California’s new employment law

Kathrin Kana juggles a few jobs: She’s a voice-over actor, a yoga instructor and a home organizer. But after the coronavirus outbreak and the stay-at-home order implemented to contain it made gigs around Los Angeles hard to come by, Kana watched her bank account balance dwindle to $36 last Friday. Seeing few options that wouldn’t involve jeopardizing her health, she tried to sign up to transcribe audio clips for Rev.com from the comfort of her home.

She got turned down — because of where she lives. Rev is among a handful of companies that stopped using workers in California after the state Legislature passed a law last fall that makes it harder to treat them as contractors rather than employees.

“I was like, ‘We are in a crisis, so can we get a workaround so we can at least make some money?’” Kana said. “This [Rev customer support] person said it doesn’t work that way.”

Workers and companies have feverishly debated the merits of AB 5, as the law is known, since Assemblywoman Lorena Gonzalez (D-San Diego) introduced it in 2019. Some workers who want to retain the independence that comes with being a contractor argue AB 5 limits their ability to work for whomever they want, whenever they want. Others say being classified as contractors by companies such as Uber, Lyft and Postmates wrongly deprives them of employee benefits such as workers’ compensation and a minimum wage.

The coronavirus outbreak, and the economic devastation it has wrought, has heaped fuel on this debate, providing fresh arguments to both sides. Pro-AB 5 voices say workers can’t wait any longer for healthcare coverage, paid sick leave and other protections in the face of a fast-moving pandemic. Those who oppose the law point to the economists already declaring the U.S. in recession and say any regulation that takes opportunities for workers off the table will do more harm than good.

Kana and others like her have published or signed petitions calling on state regulators to repeal AB 5, or at least suspend it for the duration of the crisis. “You’re trying to protect us, but you’re killing independent contractors who now have zero income,” Kana said.

Lauren Sakiyama, a freelance writer who can no longer write for the company she was contracting with because she hit the 35-article-a-year cap for non-employees imposed by AB 5, has also had trouble finding online work she can do at home. “We can talk about reforming the rules around independent contractors when this is all over,” she said.

Companies of all sizes have steered clear of working with California contractors. Smaller companies such as Enotes, a 25-person Seattle-based company, are particularly wary of the risk of potentially violating the law. Enotes co-founder Alex Bloomingdale said company lawyers advised it was too much of a liability to continue contracting with workers in the state.

“We hope the law will be changed so we can continue to provide opportunities for talented educators in the state,” Bloomingdale said.

On the other hand, workers such as Nicole Moore, a driver for ride-hailing services and an organizer of Los Angeles’ Rideshare Drivers United labor group, have held marches demanding that the Legislature enforce AB 5 and grant gig workers the employee protections they argue they’re entitled to. (Drivers at a rally in L.A., held just before the county’s stay-at-home rule took effect, were careful to maintain six feet of separation from one another, she said.) “If this pandemic is not the biggest example of why the majority of workers need this kind of backup [and benefits], I don’t know what is,” Moore said.

As The Times previously reported, ride-hail drivers began seeing a drop in demand as early as February, leaving many struggling to replace the income.
Pressure is mounting for cities and the state to begin enforcing AB 5. San Francisco’s Board of Supervisors introduced a resolution Tuesday calling on City Atty. Dennis Herrera and California Atty. Gen. Xavier Becerra, among others, to ensure employee protections for gig workers and to file injunctions against the gig companies, preventing them from misclassifying workers. The resolution is expected to win approval next week.

Nationally, gig workers may be receiving some new albeit temporary protections in a form that sidesteps the question of worker classification. The Senate and the White House came to an agreement on a coronavirus relief bill Wednesday that expands federal and state unemployment insurance to cover independent contractors for as long as four months. The bill will effectively give California workers on both sides of AB 5 some of the benefits they claim the state law has made difficult to access while leaving the question of employee status unresolved.

The federal bill also does little to close the gaps around sick leave policies that threaten to force workers to choose between driving or delivering when ill and losing out on income.

In response to pressure from lawmakers including Sen. Mark R. Warner (D-Va.), Uber, Lyft, Postmates, DoorDash and other companies agreed to offer workers as many as 14 days of paid sick leave if they are diagnosed with the coronavirus or directed to self-isolate by a physician. But for those experiencing symptoms with no diagnosis, filing for unemployment benefits will be the only remedy.

“This has really exposed the underbelly of this whole part of the workforce,” Warner said in an interview. “Things are going fine until they’re not and they’ve got nothing to fall back on.

“My hope is that during this time period we could actually work on more permanent policies,” Warner added. One possible long-term solution he’s looking at: a hybrid classification that blends the flexibility of contract work with some of the protections of employee status.

Such a model is precisely what the gig companies have asked for in the face of increasing pressure to turn their contractors into employees. In a letter to President Trump on Monday, Uber Chief Executive Dara Khosrowshahi asked lawmakers to find a “third way” that would “remove the false choice between flexibility and protection for millions of American workers.” It’s the same proposal Uber, Lyft, Postmates and DoorDash are making in a ballot measure the companies are spending $110 million to push as an alternative to AB 5.

Gonzalez sees Khosrowshahi’s plea and the ballot measure as an attempt to get out of paying into social benefit funds such as unemployment insurance or covering sick leave for workers. “That goes for any company that has been misclassifying their workers, making a profit off of them and never paying into the system,” she said. “That’s wrong. And it hurts all of us because when the unemployment insurance fund goes dry, and it will, the people who have been paying into it are going to have to continue to pay in. And Uber and Lyft should be let off the hook?”

Gonzalez conceded that there’s still work to be done to ensure AB 5 is suitable for all workers but said the outbreak has forced a pause to the legislative process. “We are still working on ensuring that AB 5 works for as many people as possible and that we can have different gradations of what a freelance job may look like,” she said. “We released language on freelance writers. We’re going to release language on musicians that we have.”

However, she maintains the ongoing pandemic validates the importance of worker protections. “The overall idea [of AB 5] is correct,” she said. Gonazlez said there are numerous workers who have been reclassified because of the law and now have access to workers’ compensation and unemployment insurance when they need it the most.

Jorge Perez, for example, works part time for an arm of the same-day shipment company Deliv. The company, which works with contractors around the country, started a California subsidiary in 2019 in order to hire employees in anticipation of AB 5.

As a result, Perez said, he now has access to workers’ compensation and paid time off. (Because Perez is a part-time driver, Deliv in California does not contribute to his health insurance.) “They give us employees complete flexibility in working when we want, and we can take off time for as long as we want and still be W-2 employees,” he said.

But for every worker with a happy story about AB 5’s effects, there’s another such as Kana, who blames it for the difficulty she’s having finding work at a particularly unsettling time.

Kana has continued to email and call Gov. Gavin Newsom’s office asking to repeal the law while she hustles to find a job. But her options remain bleak. “Whether I am an independent contractor or an employee is completely irrelevant because there is no employment situation available,” Kana said.