What was the impact of AB5 on California’s marginalized communities?
A few years ago, Jennifer Butler unexpectedly became a single mom to two young kids. At that time, she was working only a few hours a week while homeschooling them. But as an independent contractor, she was quickly able to pick up projects and cobble together meaningful work, following a schedule that suited her needs, so that she could continue homeschooling and help her children acclimate to big life changes. Yet California’s AB5 makes it dramatically more difficult for independent contractors to do what Butler did.
Independent contractors typically have a more fluid relationship with the firms that pay them than do full-time employees. Because of this looser relationship, firms have fewer legal obligations to their independent contractors than they do to true employees. Precisely delineating which workers belong in which category can sometimes be difficult. For decades, California used a multi-factor test, the primary factor of which is the degree of control the firm exercises over the worker. California also looked to eight secondary factors, which include the worker’s ability to profit or suffer loss from the enterprise and who pays for the worker’s tools.
Yet the California Supreme Court undermined this decades-long understanding when it decided Dynamex v. Superior Court in 2018, holding that independent contractor status, at least in some contexts, now turned on just two factors—(1) Whether the individual operates a distinct operation or business and (2) Whether or not the work is part of the regular business of the principal. Not long afterwards, in 2019, the California legislature passed AB5, which purported merely to codify Dynamex but actually applied it to sectors of the economy and contractual arrangements that Dynamex had not previously been understood to apply. Since then—and in reaction to vocal opposition to AB5—follow-up laws have exempted persons in some lines of work from AB5, including some freelancers (individuals who earn money on a per-job basis, rather than being paid a salary) and rideshare drivers.
For a concrete example of how Dymanex and AB5 transformed California law, imagine a translator who works for a consortium of translators. Under the previous test, she might easily qualify as an independent contractor. But under Dynamex, just because she works for a business that is generally focused on translating, she is now an employee.
Conventional wisdom has it that legislation like AB5 is good for racial and ethnic minorities and for women. Independent contractors are more likely to be minorities and women, and legislation that affords them additional benefits is thought to redound to their benefit.
But evidence adduced at briefings held by the California Advisory Committee to the United States Commission on Civil Rights suggests—not so fast. Having to treat workers previously classified as independent contractors as employees makes it more expensive to hire them. Instead of giving these workers additional employment benefits, the result is that they are less likely to be hired at all.
The California SAC heard testimony from workers from a diverse array of industries offering their experiences with AB5, including court reporters, translators, cosmetology workers, and exotic dancers. Many of these workers were women, immigrants, people of color, and from other politically disadvantaged groups.
Esther Hermida, a representative of the American Alliance of Professional Translators and Interpreters (AAPTI) testified about AB5’s impact on thousands of citizens in her industry comprised of 75 percent women. One professional translator, Ildiko Santana, reported she started her small business in 2000 as an immigrant and woman of color. She lost all 50 clients and all her income in 2020 when AB5 went into effect.
The SAC heard similar testimony from the trucking industry, which disproportionately employs African Americans and Hispanics. The committee learned that in June 2023, the City of Los Angeles terminated a 132-year-old program called the As-Needed Haul Truck Program. Eighty-seven percent of the drivers were racial and ethnic minorities.
AB5 also appears to have had a detrimental impact on small performing and fine arts organizations. Judith Flex Hella submitted written testimony describing how the concert dance scene, comprised mainly of small companies run by women and minorities, struggles to comply with the law. Gail Gordon founded a small nonprofit opera company in honor of her mother, a Holocaust survivor, that presented music by Jewish composers suppressed by Nazis. In written testimony, Gordon said she is no longer able to put on operas because production costs have increased by about 70 percent, due to AB5.
The SAC heard testimony from a forensic nurse who stated AB5 will make it harder for sexual assault victims to find appropriate medical care and pursue justice against their assailants. Particularly in rural areas of California, forensic nurses commonly work as independent contractors for several different hospitals. After AB5, she said, some hospitals will be forced to hand off these examinations to employee nurses with less specialized experience.
Pacific Legal Foundation earlier brought a First Amendment challenge to AB5 because it chilled freelance journalists’ speech but lost in the lower courts, and the U.S. Supreme Court declined review. PLF attorneys continue to urge California to repeal this unjust law: “There are now more than 75 exceptions to California’s independent contracting ban,” PLF attorney Jim Manley has written. “If a law requires dozens of exceptions to avoid destroying the careers of successful independent professionals, it’s a strong indication that the law’s basic premise is flawed.”
At the national level, the Department of Labor adopted a rule last year that, similar to AB5, would lead to widespread reclassification of independent contractors. PLF challenged that rule too, and that lawsuit is currently pending in district court.
The California SAC acknowledges that their evidence is mostly anecdotal. But the breadth of testimony about AB5’s effects suggests a profoundly negative impact on many sectors of the workforce that are disproportionately minority and/or female. Congress has several times considered the PRO Act, nationwide legislation that would essentially federalize AB5. It should consider that the likely demographic effects of such legislation may be very different from what such legislation’s supporters claim.
Read transcripts from briefings held by the California Advisory Committee to the U.S. Commission on Civil Rights on AB5, and the report from members of the Committee, below:
