With something around a thousand bills to deal with in the last two weeks of the legislative session, lawmakers decided to take a pass on two of the most difficult issues facing them: the question of utility liability for wildfires and the threat to the gig economy presented by the California Supreme Court’s Dynamex ruling on employee classification.
First, a word of understanding about the reason the legislature held back; then raising a flag of concern that allowing things to play out without legislative input could be costly.
The Dynamex case decided unanimously by the California Supreme Court set up a streamlined test to see if workers are independent contractors or if the workers should be classified as company employees. The three-part test is: A) the worker is free from employer control, (B) the work performed is outside the regular scope of the business, and (C) the contracted worker is independently established in the trade.
Business community concern is that the new economy built on technology and independent workers would be devastated by the ruling. Labor, on the other hand, sees the ruling as a boost to workers who could lose benefits if they are spun off from their status as company employees.
Some of the wildfires were started by utility owned equipment. Utilities are looking for relief from total liability for the fires, something that could conceivable bankrupt the companies. They have an ally in Governor Jerry Brown who put forth a proposal to find balance between liability owed to private property owners due to the fires and offering the utilities some cover if they followed acceptable procedures to protect against dangers.
A major reason for the lack of action was expressed by Assembly Speaker Anthony Rendon, who said of the Dynamex case: “Ultimately, this decision is about the future of the way work looks. And that requires us to be thoughtful and deliberate. And there’s no way we can be thoughtful and deliberate in three weeks.”
There was like reasoning in delaying any action on the fire liability issue with more time needed to get facts before decisions are taken, thus avoiding a hasty decision.
Anyone recalling the lack of attention paid electricity deregulation under The Electric Utility Industry Restructuring Act (Assembly Bill 1890) in 1996, which led to blackouts, company insolvencies, cost hikes and political fallout, would understand that rushing into new territory should be considered with caution.
But so should the costs of non-action.
Utilities, which face bankruptcy under the electricity crisis could be at bankruptcy’s door again depending how lawsuits are decided and liability is assessed for fires. The legislature has some time to act before all this is happens but dragging out a decision could prove costly to the energy companies and consumers. A major consequence due to the decision not to act now is that Gov. Brown will be out of office when the legislature again considers the liability penalties for the utility companies.
Because of the ruling in the Dynamex case, the business community sought action in the legislature to suspend the ruling so that a broader application of the court’s decision would not hurt California’s thriving gig economy and stall venture capital investment. California Chamber of Commerce president Allan Zaremberg wrote in the Sacramento Bee, “Although the justices may have had all the necessary facts to make an appropriate decision in the Dynamex situation, they could not consider all the other workers, businesses and consumers who rely on the independent contractor business model. The appropriate role of the Legislature is to determine the broad-based rule beyond what was decided by the court.”
In a widely distributed memo, Caitlin Vega, California Labor Federation Legislative Director countered, “Now we see the use of smartphone technology to accelerate this business model throughout what is known as the “gig economy.” Workers are hired and dispatched through apps to do everything from providing homecare to delivering packages, meals and electrical work. In many cases, these workers are doing the same work as traditional employees but without any of the rights or protections afforded to other workers.”
The legislature refused to suspend the court action, perhaps in response to the majority’s close ties to labor. But suspending the court decision could have served to give time for the legislature to understand the effects on the overall economy that has been so often praised by the current legislative leadership.
No telling at this point how all this will play out, but it would be ironic indeed if we see a reverse effect from the legislature taking action that resulted in the electricity crisis that damaged the economy, while legislative non-action today might also produce negative economic results.