Freedom Killed in California With AB5

"This new law in California, AB5, in an effort to close a loophole and help some workers, is shutting down small businesses and sole proprietors of all kinds. California is stomping on the freedoms of the smallest of businesses. Their wings have been clipped, their ability to grow and prosper, to fly, is curtailed." 
​If you own a “Small Business” and if you have ever contracted with an “Independent Contractor” and paid them and reported it using a 1099, you need to know about this new law. As of Jan 1, 2020, and possibly going back 2 years, you may have inadvertently put your business at risk, and could be fined by the state of CA.
AB5 a new bill, read the actual bill here, was quietly passed in the California legislature and signed by Governor Gavin Newsom in September 2019. It went into effect at 4am. It is the day more freedom died in California. Freedom for Californians to choose our own livelihood was literally stripped away due to the side effects of this law. It received very little media attention, and what attention it did receive was skewed. It was depicted as a benign way to help the little guys, the workers, the people working as gig workers, as independent contractors, for large successful companies who were supposedly being exploited. But were they? Is having freedom and flexibility as a choice a form of exploitation? The way they were being exploited was they were being classified as “independent contractors” rather than on the payroll as official employees. Because of this classification, the big company thought they would not have to abide by California employment "protections" for employees and was exploiting them. This classification according to this new law, was wrong and they did not “pass the test “ to be independent contractors. Were they really mis-classified? Did the legal advisors for the big company get it wrong? Was the big company using some loophole or a gray area to hire people as independent contractors instead of employees? Maybe for some. The lawmakers intended to fix a loophole if there was one and tighten up the rules for classifying workers so tight, that few if any, now can meet the standards.  This was all intended to help the little guys. This was supposed to make sure the gig workers were properly classified as employees and given benefits, sick pay, vacation time. Unfortunately not everyone gets hired as a full time employee, but can be only given part time hours, therefore for them there are no benefits or vacation time or sick pay, and no freedom to choose ones own schedule like an independent contractor can. 
Due to the stringent interpretation of what constitutes an independent contractor, another freedom, the freedom to choose ones own livelihood was stripped away in California with this new law. The freedom to hire a temporary worker, a gig worker, was taken from businesses in California, in fact now even businesses in other states will not take the risk of being fined and  hire an independent contractor if they live in California. 
On that day in September 2019 a cascade of unintended consequences began, as the rug was pulled out from under the other “little guys”. The new law changed some existing language and added new tests specifically section 2750.3 to the law everyone had been using for decades. Now there is so much confusion and it makes no sense in so many instances that exemptions are needed for many professions to be able to conduct business at all. Unfortunately there are people who still do not know the law they thought they were following has been changed.
Here is the text of the new test to determine if someone can be paid as a contractor/sole proprietor or must be hired as an employee.
“Assembly Bill (AB) 5, recently signed into law, replaces the common law test with the ABC test to determine whether a worker is an employee or independent contractor in California. Effective January 1, 2020, hiring entities are required to classify workers as employees unless they meet all conditions of the ABC test:
A.The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
B. The person performs work that is outside the usual course of the hiring entity’s business.
C. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”Item B is the problem area. If a business needs a once in awhile job accomplished it now can not use someone in the same line of business, they must be “outside the usual course” of business. The hard part of this is it is up for interpretation.
It has literally made it so difficult to interpret the language of the “well-meaning “ change that legitimate companies and individuals who want to comply are afraid. Why? Because the new law has also ramped up the enforcement and there are exorbitant fines for any entity who may mistakenly pay someone as an independent contractor, even if they have consulted advice from an attorney and made a good faith effort to comply. They go to attorneys and get different interpretations. They even go directly the the EDD and are given misleading advice.
Fear and confusion paralyze small business from taking a chance of misclassifying an entity with independent status, so the gig is cancelled instead of taking the risk. Businesses large and small are very heavily fined even when there is no malice or ill intent. Even when a business owner or independent contractor tries to follow the new wording there are no safeguards!  There is chaos and confusion now. Everyone wants to do the right thing but there is no set, reliable standard. The new law has created a gray area!
Thousands of legitimate small businesses and sole proprietors are unable to be paid  now due to the fear and confusion. Even those with an exemption are being affected. This bill is so mis-written that even the authors of this law agree there should be exemptions. Since it is so impractical and goes against common sense the lawmakers admit there should be some workers and professions that are exempt and they are allowed to still offer their services and not need to be hired as employees. The list of exempt professions is large and still growing. The larger the income and more influential the type of profession the closer they are to the top of the list and they are literally written into the language of the law. Is this even constitutional? Some professions can work and others not? Once again the little guys not on the exempt list are left out.
Since very small companies cannot take the risk of being fined $5 - $25,000 per contract (independent contractor) they must either go out of business completely or get smaller and do all of the work themselves. Larger companies also won’t risk hiring anyone that may only be needed on an occasional basis, a gig, as an independent contractor either. However if they are large enough already, and can afford it, they may or may not hire the worker as an employee. Maybe that person does not want to be an employee. The reason that person was only paid as an independent contractor in the first place is because the work was not enough to be even a part-time worker, let alone full-time. Now, having to convert someone for a once in a while gig into an employee has become by default mandatory for companies. Even if under the new law it should be OK, they have an exemption, they are afraid to risk it. The rest of the really small businesses who cannot afford to pay the fees and taxes required to convert independent contractors needed are basically out of luck.
So a loophole that was closed to stop big business from exploiting the little guy workers has caused a huge problem for thousands of other little guys who are trying to honestly make a living.
That is a huge mistake by the California legislature. The mentality behind this law is that the workers need to be protected and big business needs to be controlled and stopped from taking advantage of people. In an effort to do this, little business is being shut down.

​All big companies started out as a small company. An entrepreneur or two had an idea and in good faith started a small business, that is the way most of what are now called big businesses got started. Since this country prides itself on being the land of the free and has always revered the entrepreneurial spirit and individualism, that is the way it has always been done. Other than government workers where else do jobs come from? It takes vision, courage and the willingness to risk to start one’s own business, to make it on their own. Now that is even harder in California.
At first when a company is small their workload is also small. Their need for help is small too and in order to make a profit they may not be able to afford to hire and pay full-time or even part time workers. So they get the job done with the workers who need work and have the needed skills by paying them piecemeal or as freelancers or sole proprietors or independent contractors. These service providers get paid an agreed upon fee, the work is done, the new small business sends a notice, a 1099, to the government stating how much the independent contractor was paid, he pays his taxes everyone feels it is fair.
These freelancers, and the very small businesses who use them, these brave risk takers, are literally the seeds of new business which may become a big business someday. Hopefully they will survive and someday provide jobs and enhance the economy. Without new small business constantly “springing up “ due to need and innovation, there would be less work for everyone. It is usually a need to create one's own livelihood that leads to a new small business. If one can not find a "job" there has always been the freedom to create our own. Creating our own source of income either by choice or by necessity should be a basic right. As an employee you are always at the mercy of the business owner and can lose your livelihood overnight. As a self employed entity you control your own source of income, in essence creating your own security. Now by making it harder to be classified as independent, that is being eroded away as a basic right. This new law in an effort to close a loophole and help some workers, is shutting down small businesses of all kinds. California is stomping on the smallest of businesses. Their wings have been clipped, their ability to grow and prosper, to fly, is curtailed, 

The first thing that needs to happen is all legislators need to take another look at this debacle and see it for what it is and for the destruction to lives as it is causing. Take the time to read the individual scenarios  of the real people losing their livelihoods. There is a Facebook page, Freelancers Against AB 5,  devoted to all aspects of this new law and a place to read the real stories of the small people being affected.
Stop any more bleeding and chaos by immediately rescinding AB5. Take a look at the original intent and evaluate if the previous law even needs changing. Probably not. If a new law is needed it should be well written enough that no exemptions are needed. It should require that all professions, from the attorney, doctor, translator, sign language interpreter, face painter, dog walker, real estate agent, musician, artist, yoga instructor, nurses any and all other types of professions are all treated equally. As it is now too many professions are not exempt and are at risk. They all need to be exempt! And if the one sentence of the ABC test, the B part, was removed or mended, this could all be fixed! That is where the chokehold lies!
Also there needs to be a grace period, a chance to become compliant without punitive fines, a “let’s get the bugs out year” after something like this is passed. The uncertainty and chaos caused by this law is reprehensible and cruel and unnecessary! If the California government doesn’t undo this convoluted legislation it sends a clear message. Freedom is dead in California. Small business can go ahead and shut down. The message is that everyone needs to be an employee - be under the control of a business owner. That that is the only acceptable way to make a living in California. Small businesses, single person entrepreneurs, freelancers can all either conform or die out!
What a sad day for California. The seeds of innovation, imagination, hope, individualism and the freedom to make a living are being snuffed out. California legislators please take a look! This needs to be fixed and it needs to be fixed before any more damage is done. The small businesses and independent contractors need a champion! They need a lawmaker willing to lead the way, to be brave enough to break ranks with their fellow lawmakers and be open minded enough to really take a hard look at this!
If you feel moved to do something the following is some information on writing to your representatives.


CALL TO ACTION & LETTER WRITING INSTRUCTIONS


FIRST, sign Senator Grove's petition if you haven't already. It's important to get the numbers up on this one so they know that we're more than just a few upset voices.
http://grove.cssrc.us/SupportSB806

SECOND, Make sure you are registered to vote where you live now. Sometimes we move and don't register our new address. Also the state made some errors when they transferred files over after the Motor Voter bill was passed (also an LG bill) and some of the data was lost or corrupted.
This will become even more important as our other efforts move forward!
Check your registration status and register to vote here:
https://registertovote.ca.gov/

THIRD, Write letters. These should go to 1) your legislators, and 2) authors of bills you wish to speak up about. If your legislators have written some of the proposed bills, voice your support. You can find a list of current bills in a file named "AB 5 IMPLEMENTATION Summary" in the Files section of this page. Link here: https://www.facebook.com/groups/FreelancersAgainstAB5/files/

It should be polite in tone and should be addressed this way:
for Assemblypersons the address should be Dear Mr./Ms. [surname]: and
for Senators the address should be Dear Senator [surname]: to begin the letter.


It should also start with a simple "I am writing you to voice my strong support (or opposition) to bill [SB806, AB1928, SB1039, etc]." Support is tracked one bill at a time, so only address one bill per letter. (More on that below.) Then a paragraph briefly summarizing your own personal situation and concerns. Try to keep the letter to one page if you can. PLEASE AVOID any mention of people and companies you have worked for in one form or another because this can make them a target of AB5’s enforcement side.

Send copies to your legislators AND the author of the bill you're writing about. You can find legislators' office addresses for the Senate and the Assembly here:
https://www.senate.ca.gov/senators?sortbydistrict=ASC
https://www.assembly.ca.gov/assemblymembers?order=field_member_district&sort=asc

For more bills, just copy and paste your text from your first bill to a new letter, then change 1) the bill number, 2) your support or opposition of it, and 3) who it's addressed to and you're good to go. But if your letter has three bills on it or whatever, it will only count once.

When you are ready to mail it, address it to:
for all legislators The Honorable [first and last name] followed by the address below.
For more information, use this formal address guide:
http://www.formsofaddress.info/Representative_US_State.html

So thank you for your time in working on this. Let's make a difference!


Your Name
Your Street Address
Your City, CA ZIP


Today’s Date


Official’s Name
Official’s Office Address
Official’s City, CA ZIP




Dear Mr./Ms. [surname]:  OR  Dear Senator [surname]:


I would like to voice my strong support for [SB806, AB1928, SB1039, etc. (address only one bill per letter)].

[Briefly explain your background and circumstances and concerns in about a paragraph. Try to keep the whole letter to a single page.]


[Example prompts to get you started if you need it:
I am writing to you because….
AB5 has already cost me $XYZ this year from lost contract work due to…
My family and I have had to go on food stamps this year because…
I’ve worked as a ________ on a contract basis for ____ years, and…
My family and I need relief from AB5 because…
I am not able to be a traditional employee because….
I am struggling financially this year after AB5…
I had hoped to retire from _________ this year, but….]


Thank you for taking a moment to read my concerns and I hope you will take them into consideration when addressing legislation before you.




Sincerely,
Your Signature




Your Name