COMMENTARY
A prime example of how profoundly an election can change economic life is how a Democratic victory in November could end up wiping out most independent contractors in this country.
This would follow decades of struggle and the fallout of California’s AB 5 law, which went into effect on Jan. 1. That law also serves as a model for legislation in other states and a bill passed by the Democrat-dominated U.S. House of Representatives.
AB 5 created a three-part “ABC” test to determine whether a worker is an independent contractor or an employee. The “B” prong of the test holds that to be a contractor, a worker cannot be in the same line of business as the company using them. This eliminates most contractors, including independent truckers leased to trucking firms and drivers working for rideshare and local delivery services.
Advocates of this radical departure from commonly accepted legal practice claim it’s needed to protect these workers from economic exploitation, and make sure they are covered by workers compensation, unemployment and other insurance. In California, rideshare companies suggested an alternative measure that would include the insurance and other benefits, but still allow drivers to be independent, but it never received serious consideration in the legislature.
The reason is that the real motivation behind all these attacks on contractor status is to stem labor unions’ continuing membership decline by absorbing the former contractors into their ranks. Because independent contractors are defined legally as autonomous business entities, they are subject to antitrust laws and cannot negotiate collectively for wages and benefits.
In fact, AB 5 was introduced by a then-newly elected member of the California legislature who previously served as an official of the AFL-CIO. Also giving the game away is the name of the bill based on AB 5 was recently passed by the U.S. House of Representatives: “The Protecting the Right to Organize Act.”
Trucking interests got state and federal judges to stay AB 5 while challenging its legality regarding interstate truckers. Uber and Lyft also have mounted a referendum for Californians voters to weigh in on the issue—but only regarding rideshare drivers.
When AB 5 was passed, it carved exemptions for a handful of professions, including Amway and other door-to-door salespeople. Many other contractors who were not exempted were devastated by loss of work due to the new strictures, including freelance writers, artists, photographers and musicians, and some swore they would vote for Republicans, including Trump, as a result.
In response, California legislators recently approved additional exemptions for professional musicians, writers and artists, as well as golf caddies and wedding planners, among others. Notably not exempted are high-tech gig workers and industries such as franchising, trucking and the motion picture and television production.
Last year New Jersey followed California’s example in severely restricting contractor status, and other states are only holding off to see how the courts handle lawsuits challenging AB 5. The tussle over contractor status reaches into the highest ranks of the federal government as well. Trump Administration agencies like the National Labor Relations Board and the Department of Labor are reversing Obama-era decisions restricting contractor status.
If the Democrats triumph in November, what will the future look like? Four years ago candidate Hillary Clinton, echoing the words of another Obama Administration high official, proclaimed that there is no such thing as independent contractors; there are only misclassified employees. Given the stakes, it’s clear that this battle will continue to be waged well into the future.
As President Obama once noted, elections have consequences, and this gives you a small snapshot of what one of those consequences will be if Joe Biden and the Democrats win in November.
