SACRAMENTO — This week, California state officials and labor unions lost the latest battle in their five-year quest to destroy an emerging industry, obliterate tens of thousands of jobs, drive up prices, and eliminate safe transportation alternatives for consumers. We can breathe a sigh of relief, but we should reflect upon what this matter says about our state’s priorities.
In affirming the constitutionality of a ballot measure that allows ridesharing companies to treat their drivers as independent contractors, a state appeals court has done the right thing this week. The continuing saga — likely to end up in the same court that started this nonsense — reminds us that California policymakers always put one special interest above the public interest: labor unions.
Voters approved Proposition 22 by a 59 percent to 41 percent margin in November 2020, thus exempting drivers for companies such as Uber, Lyft, and DoorDash from the statewide ban on independent contracting. It also provided drivers with some portable employment benefits. Opponents yammer about immense campaign spending by ridesharing companies, but polls suggest voters knew exactly what they were approving.
Since 2018, the state’s freelance economy has been fraught with uncertainty following the California Supreme Court’s far-reaching decision in Dynamex Operations West v. Superior Court of Los Angeles. The case involved a delivery company that reclassified its workers from permanent employees to independent contractors. In its decision, the high court created (out of thin air, apparently) a new test that largely forbade companies from using contractors.
Labor unions were gleeful. Note how eagerly the union-allied Biden administration has tried, largely via regulatory fiat, to impose that “ABC Test” at the federal level. Progressives claim that businesses are “misclassifying” workers, and they want to force businesses to hire workers as employees, thus making them eligible for various benefits and subject to state labor laws. (RELATED: Biden’s Tone-Deaf New Labor Rules)
This obviously poses an existential threat to emerging app-based companies that rely on a contractor model, but it also posed an entirely predictable threat to many traditional professions where workers eschew the 9–5 cubicle or factory floor work model. When the Legislature codified Dynamex via Assembly Bill 5, which went into effect in January 2020, it exempted many industries — primarily those with the most influential lobbies.
Nevertheless, economic destruction ensued. Companies eliminated jobs rather than hire people as salaried employees. Publications — including Vox, which ran a piece championing AB 5 — laid off its California stringers. Musical groups that relied on gig workers had to shutter their operations. All types of freelance workers — from photographers to sign-language interpreters to rabbis — suddenly found themselves in a pickle.
The same Gov. Gavin Newsom who used his vast executive powers to suspend laws during the COVID pandemic refused to suspend AB 5, even as people who were forced to stay at home lost their stay-at-home freelance opportunities. Some Californians embraced the workaround of starting an LLC, but that imposed new costs on workers who already were struggling.
Finally, the Legislature exempted many more industries, reaching a total of 109 exempted professions, in subsequent legislation as the blowback became too intense even for progressives to ignore it. Ridesharing companies were the original target of the bill, but voters passed Proposition 22 — and now the court has upheld it, although it rejected a portion of the ballot initiative that limited collective-bargaining efforts.
The court ruled that the Legislature was authorized via an initiative to change worker compensation laws, thus overturning a decision invalidating the law in Alameda County, one of the state’s most liberal jurisdictions.
“Today the Appeals Court chose to stand with powerful corporations over working people, allowing companies to buy their way out of our state’s labor laws and undermine our state constitution,” said Lorena Gonzalez Fletcher, executive secretary-treasurer of the California Labor Federation. She was AB 5’s author when she was in the Assembly, yet she apparently hasn’t learned that her efforts posed the real threat to working people, not to mention their choices, freedoms, and livelihoods. (RELATED: Spinning California’s Disastrous Contracting Ban)
What a pointless nightmare. The Southern California News Group editorial board rightly called AB 5 “a case study in how California undermines its business climate.” What explains why policymakers were so willing to endanger real-world jobs — and the vast majority of rideshare drivers who prefer to work as independent contractors given the flexible schedules such work offers — in a quest to promote a policy that stifles union competition?
You know the answer: union power. But we’ve yet to figure out a way to counteract that influence.
Steven Greenhut is Western region director for the R Street Institute. Write to him at firstname.lastname@example.org.
READ MORE by Steven Greenhut:
From Megadroughts to Megafloods
Section 230: Be Careful What You Wish For