Coronavirus

California Law Limiting Independent Contractors is Hindering Coronavirus Response, Experts Say

'It speaks to an absolute ignorance of expert opinion and defiance of common sense'

California governor Gavin Newsom / Getty Images

Democratic California governor Gavin Newsom on Wednesday rebuffed calls to suspend a controversial labor law that experts say hinders the state's pandemic response and hurts vulnerable workers.

State and federal legislators, small business owners, and more than 150 economists and political scientists have urged Newsom to suspend California Assembly Bill 5 (AB5), the controversial 2019 bill that limited companies' ability to classify workers as independent contractors. They argue that the law has impeded the state economy and burdened health care systems already strained by coronavirus. Many hospitals, particularly in rural communities, rely on independent contractors to provide health services, as they lack the resources to support full-time employees. And as thousands of Californians face unemployment due to the pandemic, AB5 makes it nearly impossible for workers to take on temporary jobs from home.

Despite these concerns, Newsom, who did not respond to a request for comment, praised AB5 during a Wednesday press conference. He touted the law as an example of the state's national leadership.

"The state of California prides itself on being a national leader as it relates to protecting our workers from misclassification," Newsom said. He added that the state is "advancing the cause in righting those wrongs and continuing to transition in the implementation of AB5," indicating that the law will remain in effect for the foreseeable future.

Though AB5 is unique to California, backlash over its enforcement could have national implications. Presumptive Democratic nominee Joe Biden endorsed the law in March, calling it "ground-breaking." Biden's support for the law—which was written by the AFL-CIO—could place the presumptive Democratic nominee at odds with disgruntled Californians as he woos the country's largest labor union.

AB5 mandates stringent requirements employers must meet in order to classify workers as independent contractors, who do not receive benefits like unemployment and health insurance. The law caused many who had made a living as contractors to be reclassified as direct employees. Widespread layoffs followed, as companies struggled to meet the increase in legally imposed labor costs—putting thousands of freelancers out of work.

Now, as coronavirus increases the demand for flexible employment for food delivery drivers, online tutors, and even medical professionals, experts say AB5 is exacerbating the pandemic's strain on California's economy and health care system.

"If you want to minimize economic damage, AB5 makes no sense," Pacific Research Institute senior fellow Wayne Winegarden told the Washington Free Beacon. "Whether it's health care or the broader economy, AB5 is hurting our response to this virus," he said.

AB5 is typically associated with "gig economy" jobs, including food delivery apps that connect consumers to independent service providers working on their own schedule. While these services are especially vital during the coronavirus crisis—they help at-risk populations stay at home, limiting the virus's spread—independent contractors are also common in professions key to California's health care system. Winegarden said that because California has large non-English-speaking populations, many residents rely on translators to communicate with their health providers. Before the Newsom administration implemented AB5, medical interpreters typically worked as independent contractors, and many were able to perform their jobs from home.

"Anything we can do to help people not just earn income for themselves, but provide services for at-risk populations, that's important, and AB5 is restricting that," Winegarden said. "I would never have thought of how important translators are to addressing the virus, how important food delivery people are to addressing the virus. The fact that AB5 interferes with that, in ways that aren't particularly obvious, is a very important cost."

Lawmakers at both the state and federal level have called on Newsom to suspend AB5 until at least the end of the pandemic. Republican state assemblyman Kevin Kiley introduced a bill to suspend the law in February. The spread of the coronavirus and resulting lockdown have added a sense of urgency to the repeal effort. Kiley said AB5 has left jobless Californians unable to gain the flexible employment they need to survive financially amid the state's stay-at-home order.

"It speaks to an absolute ignorance of expert opinion and defiance of common sense and human decency," Kiley told the Free Beacon. "We have people in their homes right now, at a time when 2.6 million unemployment claims have been filed, who have the skills and desire to work, yet applications to work remotely for different companies specifically say that if you work in California, you're not eligible. We need all the economic opportunities we can get right now."

Opposition to the law is not limited to Republican lawmakers and local think tanks. More than 150 Ph.D. economists and political scientists, including Nobel laureate Vernon Smith, sent Newsom a letter calling on the governor to suspend AB5. The group of experts wrote that the law is causing "substantial, and avoidable, harm to the very people who now have the fewest resources and the worst alternatives available to them."

"You have people telling me they lost half their business because of AB5, and now they lost the other half because of the virus," Kiley said. "When it comes to economic policy, Newsom continues to outsource to the state's most powerful special interest groups."

House Minority Leader Kevin McCarthy (R., Calif.) echoed calls to suspend AB5 after urging Newsom and the state legislature to repeal the law.

"With California's shelter in place order in effect for nearly a month, it's clearer than ever that the state's AB5 policy continues to hurt gig-economy workers," McCarthy told the Free Beacon. "Though I am encouraged to see that Governor Newsom has begun to implement the Pandemic Unemployment Assistance program created under the CARES Act, gig economy workers deserve to maintain their livelihoods throughout the duration of this pandemic and afterwards."