Exemptions Could Doom Dynamex Bill

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

The Achilles heal of the bill to define workers role in the gig economy just might be a growing list of exemptions in the measure. 

In attempting to codify the California Supreme Court’s decision in the Dynamex case, which set a test to determine whether a worker was a full time employee or an independent worker, Assemblywoman Lorena Gonzalez put forth AB 5 with the support from the California Federation of Labor. One of the sponsor’s goals requiring businesses to treat workers as employees is to unionize them.

The battle lines have been drawn around the issues of whether workers will lose their independent status and flexibility and protecting workers with full benefits guaranteed by the state, such as minimum wage, worker’s compensation and other benefits.

A number of workers feel their lose of independence will mean lost work and lost wages, while some businesses complain that they cannot handle the extra fiscal burdens under state requirements for  contractors and work-on-demand laborers. 

In an effort to apply the law to the changing economy and recognizing that some workers cannot function well under AB 5, exemptions have been granted for certain professions. So far physicians, certain licensed professionals, hairdressers and insurance brokers have been carved out from under AB 5.

But others also complain that AB 5 would crimp their ability to conduct an independent business. Members of the recording industry, court reporters, freelance writers, and others want to be left alone.

As exemptions grow so does the rational for the legislation. 

Yet, not acknowledging the nature of California’s gig economy could cripple many start-up businesses.

Assemblywoman Gonzalez wants to make few concessions as possible in pushing the bill forward. The bills backers argue, as Speaker Anthony Rendon did at a Capitol rally, those who advocate for an unfettered gig economy or innovation economy are really taking workers back to feudalism.

It’s the other way around. Efforts to restrict workers from flexible, independent situations and applying old work restrictions to an ever-changing economy are taking us backwards.

An attempt to find a compromise has been put forth by the ride-sharing companies, Uber and Lyft. They have become the faces of the debate with many of their drivers seeking more pay and benefits while others stand by the current model. The compromise proposal would offer some wage guarantees and opt-in benefits, but so far Assemblymember Gonzalez is not interested.

Yet, it is more than the well-known ride sharing businesses that would be affected if AB 5 becomes law.  Often lost in the discussion are small businesses and that’s where the threat of exemptions serves as a weak link if the plan comes into play.

As Shawn Lewis, Policy Director at the National Federation of Independent Business/California wrote in a release following the Senate Labor Committee hearing, “industry-by-industry exemptions from Dynamex simply does not work for small businesses. By definition, small businesses represent a vast diversity of industries, and the State Legislature should not be in the business of picking winners and losers.” 

If a blanket approach won’t work without hurting the economy and as more and more businesses scramble for exemptions, AB 5 could be in trouble.

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