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California's Attack on Gig Workers

No law is perfect, and we should always be open to improvements in law, but there are good reasons why U.S. labor and tax regimes distinguish between employees and independent contractors.

Employers bear significant responsibility for employees. Not only is there a significant body of labor law protecting employees, but employers are in many cases required by law to provide certain benefits, limits on hours, etc. Employees are expected to work when their employer needs them and to work with the employer’s capital, equipment and facilities. In general, it isn’t particularly risky to be an employee.

Independent contractors, on the other hand, work when and if they wish, for whom they wish, and with their own tools and equipment. Independent contractors, as opposed to employees, are responsible for their own tax withholding and payment. And independent contractors almost always have chosen that status as their preferred way of working—they want control over their schedules, customers, time and use of their energy.

These are real differences, and it’s why tax law and employment law treats employees and independent contractors differently.

So why did the California legislature pass AB5, which bars freelance writers, musicians, photographers, translators, florists, makeup artists, carpenters, event planners and dozens of other professions from being independent contractors? And which forces them to either become employees or stop working?

Because the state was going after Uber, Lyft, DoorDash and other companies that employ “gig workers.” Union bosses and their elected tools in the California General Assembly say such companies are abusing their workers, even though no one is forced to work for Uber or Lyft. What they really want is the ability to unionize gig workers.

Even its sponsor agrees that AB5 was driven by organized labor. Unions generally don’t organize independent contractors, but they can unionize employees, and so unions have an incentive to force workers out of independent contractor status and into employment status.

In the course of going after big tech companies, California lawmakers destroyed the livelihoods of many thousands of freelancers, who work part-time or who otherwise want or need more control over their careers than traditional employment allows. California lawmakers have been resisting the contractors’ pleas for months, but finally this week passed a “cleanup bill” that carves out some exceptions to appease a handful of professions.

But that only lessens the damage—it doesn’t solve the problem. Labor and tax law should allow more, rather than less, flexibility in employment to reflect the diversity of choices workers can make in an information-based society. California, which births so many new technologies and innovations, seems intent on killing the goose that lays so many golden eggs.

Why should non-Californians care as California slowly strangles its own economy?

First, California’s purpose in life seems to be to model bad policy for the benefit of the other 49 states. So we watch and learn from California’s mistakes.

But second, these bad ideas may be coming soon to a theater near you. So we must all be on guard to make sure the bad ideas in California’s disastrous AB5 don’t end up harming workers in our states.