The Many Unintended Consequences of AB 5

By now anyone who works as an independent contractor in California has heard of AB 5, which will force companies to reclassify them as employees. The justification for AB 5, which was reportedly written by the AFL-CIO, is to prevent companies from exploiting workers. Without AB 5, the reasoning goes, companies hire freelancers to do the same work employees would do, in order to avoid paying for benefits such as Social Security, Medicare, unemployment insurance, and workman’s compensation.

The Social Security argument has no merit, because freelancers are still required to pay Social Security taxes, and still get Social Security benefits when they retire. They pay the employee and employer share, because they’re self employed. Ditto for Medicare. The rate a self-employed independent contractor accepts in exchange for their services should take that into account.

While there may be some merit to the argument that companies hire freelancers to avoid paying unemployment insurance and workman’s compensation, there might have been other legislative solutions to that, such as setting up the means for independent contractors to purchase their own unemployment and workman’s compensation insurance – or, (gasp), roll a workman’s compensation individual option into Covered California.

Instead, AB 5 creates far more problems than it solves.

Predictably enough, those special interests with enough clout to carve out their own industries from being affected by AB 5 made their voices heard in Sacramento. Courtesy of CalMatters, here are some of the jobs that are exempt from the impact of […] Read More