[Source: SFGATE] As California moves forward with legislation that could turn many independent contractors into employees, some industries are vociferously protesting that the changes could hurt their workers and raise costs for consumers.
Assembly Bill 5, sponsored by Assemblywoman Lorena Gonzalez, D-San Diego, saw its chances of becoming law rise this week when Gov. Gavin Newsom threw his support behind it. The bill has passed the Assembly and two Senate committees, and this month will head to the Senate floor, where a strong Democratic majority is likely to pass it. Newsom, Gonzalez, labor leaders and other AB5 proponents say it would provide basic safety net protections like unemployment insurance and workers’ compensation for hundreds of thousands of misclassified workers.
But some opponents say that many people who would become employees under the bill want to remain independent contractors and warn of a ripple effect hitting their customers.
Much attention has focused on app-enabled gig workers, such as Uber and Lyft drivers and Postmates and DoorDash couriers. Uber, Lyft and DoorDash together are spending $90 million on a November 2020 ballot initiative to win exemptions for their workers. Dozens of professions already are exempt from AB5’s provisions. More were added on Friday.
Industries that are still seeking exemptions include:
Health care: Although doctors, dentists, psychologists and podiatrists are exempt from AB5, many other medical professions are not, including behavioral therapists and specialties such as optometrists and certified registered nurse anesthetists.
The impact for patients could be huge, said Gail Blanchard-Saiger, vice president of labor and employment at the California Hospital Association, which represents more than 400 hospitals and health care systems. Although hospitals employ 97% of their workforce, they rely on independent contractors to fill gaps when employees are on leave, she said. Moreover, many small and rural hospitals don’t have enough volume to hire a speech therapist, for instance, so they rely on contractors, she said.
Switching those part-time and fill-in positions to employment may not work, because the professionals don’t want that kind of job, she said.
We’ve heard from these independent contractors that they like their autonomy,” she said. “They get paid at a higher rate and have a lot more flexibility” than employees.
“If these services are less available, then patients will see delays (such as for lab tests) or limitations on access to care,” Blanchard-Saiger said.
Non-exempt health professions include: certified registered nurse anesthetist; perfusionist; occupational therapist, speech therapist, optometrist, nurse practitioner, physician assistant, radiation therapist, licensed professional clinical counselor, marriage and family therapist, licensed clinical social worker, respiratory therapist and audiologist.
Newspapers and other media: Daily print publications, including The Chronicle, use independent contractors to deliver papers to homes and businesses. Most work a few hours in the morning. Providing them with benefits, which can add up to 30% to labor costs, could be prohibitive for newspapers, which already operate on razor-thin margins, said Jim Ewert, general counsel of the California News Publishers Association, of which The Chronicle is a member.
Ewart said he thinks many papers could choose to curtail their delivery areas or increase subscription costs if AB5 becomes law. “My fear is that if print revenue drops because fewer eyeballs are reading the ads, the downward spiral the industry has already experienced,” because of the internet, would increase, he said. “The outlook is not good for sustainability.”
Ewert described many newspaper carriers as “new entrants to the economy, who may not speak English” and often work as a family unit. Their current pay works out to at least minimum wage, he said, and includes a requirement for them to obtain insurance.
“In rural markets, home-delivered newspapers are at risk,” Chronicle Publisher Bill Nagel said. “Newspapers need the long-time, existing regulations to remain intact.”
For freelance writers and photographers, AB5 would restrict the number of submissions they could publish in a single publication to 35 a year. That provision could require outlets to convert some contributors to staff or stop working with them.
In an opinion piece published this week in The Chronicle and elsewhere, the newspaper association suggested the impact on the newspaper industry could be dire. “Simply put: AB5 will likely cause the death knell for some printed versions of California newspapers. It’s not the only challenge to professional journalism in 2019, but it is by far the most serious.”
Truck drivers: Some 70,000 owner-operators of trucks haul everything from agricultural products to containers from the ports, to retail goods to e-commerce deliveries, said Chris Shimoda, vice president for government affairs at the California Trucking Association.
“A good number were employee drivers in the past and wanted to start their own operations,” Shimoda said. They paid from $120,000 to $200,000 to buy their own big rigs because they wanted to work independently. If they were reclassified as employees, they’d either have to sell their trucks or find a company that will subsidize the cost of driving their own trucks, he said.
Anecdotally, he’s heard that some drivers might choose to move to Nevada, Oregon or other states so they could continue as independent owner-operators.
Supply chains are complex, so it’s hard to estimate how having fewer trucks on the road might impact consumer goods. Still “I think you will see increased costs,” said Derek Ishikawa, a labor attorney with Hirschfeld Kraemer in Santa Monica, who represents businesses in employment disputes, including several trucking firms. “This is a big worry in the industry.”
On Friday, Gonzalez added an exemption for truck owner-operators who work with construction companies that are registered as public works contractors, but Shimoda said the carve-out was so narrow that it would not affect the vast majority of owner-operators.
About 100 owner-operator truckers planned a convoy encircling the state Capitol on Thursday to protest AB5.
Franchises: People who paid a franchise fee and ongoing royalties for a “business in a box,” including training, marketing and brand support, currently operate as small business owners, employing their own workers. California has 76,000 franchise businesses with 729,000 employees, said Matt Haller, senior vice president of government relations with the International Franchise Association in Washington.
AB5 “would essentially convert these business owners into employees overnight,” he said. As written, the bill means that anyone who owns a McDonald’s or other franchise would become an employee of McDonald’s or that other franchise — and so would all their workers, he said.
McDonald’s and other large franchisers will not happily bear the cost and bureaucracy of restructuring their business models to employ hundreds of thousands of new workers, he said, noting that franchise workers are already employees.
“Employees of franchises are already getting the benefits of federal and state laws,” he said. “The franchisees seem to be collateral damage in this broader fight.”
Consumers could see higher costs, especially if the move triggered litigation, he said.
Saunda Kitchen has owned Mr. Rooter Plumbing of Sonoma County for 24 years and has 30 full-time workers, all employees who receive W-2 tax forms, she said. AB5’s language about control means that she’d become an employee since Mr. Rooter dictates things such as the logo, uniforms, background checks and other operational details.
She thinks there’s “a significant chance Mr. Rooter would pull out” and cease doing business in California. If she were to start her own plumbing company, she’d be building a business from the ground up, losing the brand equity and customer base that took years to build, she said.
Other businesses: Language translators, youth sports coaches, and some nonprofits have also sought exemptions or lodged objections to AB5’s provisions.
Independent musicians, who may hire engineers, dancers, background vocalists and others, might be forced to become employers of those professionals, a prohibitive expense, music industry executives wrote in a Variety opinion piece on Wednesday.
AB5: WHO’S EXEMPT?
Numerous professions are exempt from being reclassified as employees under the pending AB5. Their general unifying theme is that these contractors can set their own rates, communicate with customers directly, and generally make at least twice minimum wage.
New language introduced Friday also exempted businesspeople who operate as sole proprietors or partnerships, though under stringent criteria meant to ensure that they have registered their businesses and genuinely work for multiple customers.
Doctors, psychologists, dentists and podiatrists
Insurance agents
Stockbrokers
Lawyers
Accountants
Engineers
Veterinarians
Direct sellers
Real estate agents
Hairstylists and barbers
Aestheticians
Commercial fishermen
Marketing professionals
Travel agents
Graphic designers
Grant writers
Fine artists
Enrolled agents
Payment processing agents
Repossession agents
Human resources administrators
Photographers, photojournalists, freelance writers, editors or newspaper cartoonists who make 35 or fewer submissions a year (does not apply to motion picture industry, live shows, music videos, broadcast news, commercial productions)
Source: SFGATE
September 5, 2019
