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THE TRUTH ABOUT AB 5

THE TRUTH ABOUT AB 5

The backlash has been palpable to say the least.

Over the last few days, thousands of freelance or 1099 contract workers have taken to the streets and airwaves to protest California’s new labor law Assembly Bill 5, or “AB 5”.

The impacted professions include: small-business owners, truck drivers, musicians, realtors, writers, journalists, campaign workers, health aides, consultants, coders, translators, cartoonists, and basically everyone in the Uber, Lyft gig economy.

While it is true that the law was a response to a court decision that reclassified the legal test for contractors, the bill’s author, Assemblywoman Lorena Gonzalez, is not being exactly truthful with her recent statements.

For months, dire warnings were given to California Democrats like Lorena Gonzalez and Governor Newsom that this change in the law would have disastrous impacts on California’s economy, but the warnings fell on deaf ears.

Assemblywoman Lorena Gonzalez celebrates the passage of AB 5.

The bill’s author, Assemblywoman Lorena Gonzalez, is a former union organizer and this new law must be viewed through the lens that by forcing contractors to become employees, a massive new market of potential union workers becomes available.

Adding insult to injury, Assemblywoman Lorena Gonzalez is one of the largest recipients of labor union political contributions in the California Legislature.

The negative impacts of AB 5 are not confined strictly to jobs lost or wages drastically cut.  As the cost of doing business goes up for companies to remain compliant with AB 5, those costs undoubtedly trickle down to the every day California consumer.

AB5 may prompt the company to raise prices for its customers, potentially resulting in fewer sales for restaurants. It would have disastrous results if it’s implemented because it’s trying to impose an imperfect solution into a very big problem…The net impact of AB5 would be a lot of lost economic opportunity and income for the state of California.

– DoorDash CEO, Tony Xu — WSJ Tech Live panel discussion

These increased costs and rising prices are compounded by the state of California’s recent allocation of $20 million dollars to enforce compliance with AB 5.  $17.5 million will go towards investigating businesses, $3.4 million will go towards training staff to conduct investigations into businesses and $780,000 will be provided to the California Department of Justice to prosecute these cases against California businesses.

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