Written by Thomas Geiser
A recent study by Cloud Kitchens, a Los Angeles based startup for “virtual deliver only restaurants,” found that 206,000 San Diegans are self-employed. That is roughly 12.2% of the workforce of San Diego County. This makes San Diego the third-largest hub of self-employment in the country after Miami and Los Angeles.
However, this flourishing self-employed economy is under threat from the now infamous piece of legislation called Assembly Bill 5. AB 5 makes it more difficult for companies to hire workers as independent contractors. The new benchmark says that a worker is an employee if they “perform tasks under a company’s control, their work is integral to the company’s business, and they do not have an independent enterprise in that trade.”
Employees are given benefits unlike independent contractors, which invariably costs the employer more to hire full-time workers. Independent contractor work provides more freedom to the worker while allowing the company to hire more people since they do not have to pay for all of the additional employee benefits. Excellent examples of such companies include Uber and Lyft.
It’s also worth noting that the enforcement costs of AB 5 are inordinate. These costs will, of course, be paid for by taxpayers who are already being negatively impacted by the bill.
Governor's 2020 budget provides $20 million to enforce #AB5 – going after small business and freelancers in California. #FixAB5 #AB5hurts #caleg @GavinNewsom @CAgovernor pic.twitter.com/OU3qB7ROj2
— CA Senate Republican Caucus (@SenateRepCaucus) January 10, 2020
What is particularly appalling is that Assemblywoman Lorena Gonzalez of San Diego sponsored this bill in the State Assembly. With San Diego’s huge self-employed population, this change is already costing businesses a huge amount of money as they reclassify these independent contractors as regular employees. In the worst case scenario, companies that rely on independent contractors may be forced out of business or have to let independent contractors go to stay in business.
California Democrats like Lorena Gonzalez have made the argument that this bill will make it easier for workers trying to make a living in the state because of how expensive it is to live here. Changes can be made that would make it cheaper to live in California, like decreasing taxes, but bills like AB5 will end up exacerbating the dilemma. At some point, the politicians that pass legislation like AB 5 will be forced to admit that they are not the solution, but part of the problem.
