If AB 5 to reclassify workers in the new economy becomes law it will set up future trouble for the state much like the bills in the 1990s to deregulate energy and the granting of wider pension benefits for public employees.
The bills are quite different and their paths to becoming law are also different. Both the energy and pension bills passed with little opposition and less scrutiny. In contrast, there has been plenty of concerns raised about AB 5, but while the launch of these bills is dissimilar, the likely crash landing of the new measure will feel like what happened with those 1990s laws–a troublesome mess.
Gaming of the energy market spurred on by the deregulation bill resulted in blackouts and economic pain for the state and ratepayers alike. Meanwhile government pension promises, which were supposed to be meet handily by stock market gains did not materialize to satisfy skyrocketing pension demands. Using the state bill as a model, local governments jumped on the new pension promises band wagon and now nearly all governments in California are struggling under pension debt.
With AB 5 passing the State Senate, assuming the Assembly agrees to amendments, only the governor can knock it out. With an op-ed in the Sacramento Bee on Labor Day, Gavin Newsom declared his approval of the ideas encompassed in AB 5 so it looks like a done deal. But what wins approval of the legislators could spiral out of control later on, as history teaches. That is the dangerous course for AB 5.
California’s robust economy faces threats if the worker relationships created by entrepreneurship and worker freedom offered by the new economy are upended by government fiat. The dynamic surge in California’s technology-driven economy would likely stall.
The bill will be ridiculed for its lack of fairness and therefore its effectiveness with so many industries and workers feeling left out with multiple exemptions offered to favored industries. Senator Pat Bates, who opposed the bill, called the measure a “Christmas tree of exemptions” with the legislature picking business and worker winners and losers depending on whether they received an exemption or not.
As I’ve stated on this page before, the many exemptions and the scramble for future exemptions by those left out will be the Achilles heel of AB 5.
One interesting example of an industry feeling slighted is the newspaper business. Full page newspaper ads spoke out against the bill fearing that contract newspaper delivery workers would cause a prohibitive financial burden for struggling newspapers if the delivery workers have to be treated as full time, full benefited employees.
What did Mark Twain say about not picking a fight with those who buy ink by the barrel?
Legislators will hear about problems caused by this bill over and over when the economy stalls and businesses and workers seek more and more exemptions over time or when an initiative to fix the worker classification rules makes the ballot.