Some Fear Bill Regulating “Side Hustles” Would Hurt City’s African-American Community

Published : Monday, August 12, 2019 | 4:50 AM

A bill working through the California legislature is designed to protect workers from misclassification as independent contractors, but the fear in the community of African-American and app-based freelance drivers is that it will hurt them more than help.

Assembly Bill 5 was authored by Assemblywoman Lorena Gonzalez (D), and its intent is to codify the California Supreme Court’s ruling in Dynamex Operations West v. Superior Court of Los Angeles into state law.

That 2018 ruling said businesses must apply an “ABC Test” in determining whether a worker is an independent contractor or employee.

The high court said that, if an employee is not under the contracting company’s control, does work not central to that company’s business, and maintains their own concern, then they’re a freelancer.

Otherwise it is W-2 time, which includes workers’ compensation, unemployment insurance, Social Security, and all the rest.

Ishmael Trone, a Pasadena-based African-American businessman, said the legislation will hurt those in the black community who are freelance drivers in order to make ends meet.

“It’s going to be important to all minority communities, because you have individuals that are subsidizing their income by becoming drivers for Uber and Lyft,” said Trone. “I have a lot of clients that are minorities; Hispanics and blacks who are drivers to earn more income because of the rising cost of housing and food and everything else.”

As an accountant, Trone can attest to the significance of the income earned on such “side hustles” to affected households.

Pastor William Smart, president and chief executive officer, Southern Christian Leadership Conference of Southern California, agrees.

Smart is a prime mover behind the I’m Independent Coalition, which is engaging the legislative process with the goal of, at least, getting an exemption for app-based driver fleets.

“Drivers and community organizations have come together because of the effects this bill could have on the whole ride-share industry,” said Smart in an interview. “A lot of contractors work for Lyft.”

Smart said he’s taken Lyft 180 times over the last four years and has talked to many drivers.

“I came to realize that they like the status,” he explained. “They like to be able to come and go and that’s important to them. And they like the money and the opportunities.”

The I’m Independent Coalition appears to be focused on harnessing the energies of Lyft drivers in particular.

According an EMC Research Poll of Lyft drivers shared by the Coalition, given the choice, most would opt to remain independent contractors, rather than become employees. Just 7 percent of respondents preferred becoming an employee.

Some 88 percent of those queried consider work hour flexibility to be an important aspect of the arrangement; while 81 percent said flexibility of location is important.

Moreover, 65 percent identified the ability to do independent contract work in conjunction with their other work or attending school as important.

About 10 percent of Lyft drivers identify as African-American. That number is higher, 13 percent, in Los Angeles. About 38 percent of the company’s African-American drivers in California are female.

Trone noted that, if reclassified as employees, the drivers will not be able to receive the 20 percent qualified benefits deduction afforded them as self-employed individuals on their federal income tax returns.

“So that is going to be significant for minority entrepreneurs, because one; they’ll start paying more taxes as W-2 employees, and two; you’re going to have a lot of individuals who will stop doing that service for that reason.”

Trone said the very business model by which companies such as Uber and Lyft operate is threatened by AB 5.

“High-wage earners are not drivers for these companies,” he observed. “These are the low-wage earners subsidizing their income to pay for the high cost of housing, etc. There will be a domino effect. You’re going to get rid of that independent contractor status. You’re going to hire less people. They’re going to make less money. Isn’t that where homelessness comes from? Isn’t that where everything comes from? That’s the effect this landmark court decision could possibly have in the long run.”

Concern about the decision, and the bill’s impact go beyond the African-American, and minority, communities.

“This is a rare instance where the imposition of new rules has generated opposition from almost everyone touched by the decision,” said Pasadena Chamber of Commerce President Paul Little.

He noted that franchise holders are concerned they may be categorized as employees of the larger companies with which they hold the franchise. Locally-owned business consultants are worried that reclassifying their infrequently used subcontractors will kill their operations.

“The State Legislature is currently reviewing legislation to implement the Dynamex decision,” Little told Pasadena Now. “I would hope they are careful to minimize unintended consequences for many in our economy who could be negatively impacted by the new ABC Test.”

AB 5 passed the Assembly May 29 on a 59-to-15 vote. Local Assemblyman Chris Holden (D) voted in favor of the measure on the Assembly floor.

The bill is now before the Senate Committee on Appropriations.

Some opponents point out that the bill’s author, Assemblywoman Gonzalez, comes from an organized labor background. Her prior job was as Secretary-Treasurer for the San Diego-Imperial Counties Labor Council.

According to a bill analysis by the Senate Committee on Labor, Public Employment and Retirement, the number of workers classified as independent contractors rose 30 percent between 2005 and 2015.

It noted that, in classifying workers as independent contractors, employers trade control over working conditions in exchange for shedding obligations such as paying overtime, remitting payroll taxes, getting workers’ compensation coverage, and ensuring workplace safety.

“This creates a tremendous incentive for employers to misclassify their employees and illegally avoid paying the cost of benefits,” the committee said. “This amounts to a cost-shift from an employer to the employee specifically, and, in the case of particularly egregious examples, to the people of California generally in the form of increased safety net spending.”

As for the case which spawned AB 5, it involved a delivery company that abruptly reclassified all its employees as independent contractors in order to save money, according to the analysis.

After the company’s move, drivers could not set wage rates, despite their “independent” status. They were required to use their own vehicles, pay for all transportation expenses, as well as their company uniforms.

An aggrieved worker sued Dynamex in 2005. The case went all the way to the state’s highest court, which found the drivers to have been misclassified.

Noting that the complainant worker’s quest for justice took 13 years, the committee said, “In codifying the ABC Test, AB 5 ensures that this injustice is not repeated.”

blog comments powered by Disqus