Influencers Opinion

How should California regulate a growing gig economy? Depends on who you ask

Note to readers: Each week through November 2019, a selection of our 101 California Influencers answers a question that is critical to California’s future. Topics include education, healthcare, environment, housing and economic growth.

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California Influencers this week answered the questions: How should California decide whether part-time workers in a gig economy should be classified as employees or contractors? How can we best provide job opportunities for part-time workers in a gig economy? Below are the Influencers’ answers in their entirety.

“Make no mistake, this is economic innovation based on exploitation of labor”

Anthony Rendon - Speaker of the California state Assembly

The gig economy doesn’t have the dirty, dangerous factories of the Industrial Revolution, or child laborers or piece workers. But, make no mistake, this is economic innovation based on exploitation of labor. It is clear as the glass on your smart phone. Our ideals should not allow billionaire tech titans and their investors to control conditions for people who are compelled to work two and three jobs – jobs, not gigs – to make ends meet. California has to protect workers’ right to organize and receive not just adequate pay, but adequate benefits and safety protections. Court decisions have affirmed rights that we must establish in state codes. AB 5 is a good start.

“One-size-fits-all solutions like AB 5 go too far”

Jim Wunderman - President and CEO of the Bay Area Council

California has thrived creatively, economically and culturally because we attract top talent, encourage risk-taking and give people the flexibility and freedom to pursue their dreams on their own terms. It’s a successful formula that reflects California’s indomitable entrepreneurial spirit and empowers people to do great things. For more than 2 million Californians, this means being able to work independently in a wide range of jobs across a wide range of industries – everything from caterers and freelance writers to truck drivers and tech workers. As part-time workers and independent contractors, these Californians can be their own boss, set their own schedule, negotiate their own work agreements and pay, and decide for themselves how best to structure their work to fit their lives and lifestyles. A poll last year found that 93 percent of these workers wouldn’t have it any other way. And yet, proposed legislation (AB 5) would effectively end or dramatically alter the freedom and control these workers enjoy from operating independently. There’s little question that as our economy and workforce evolve with the arrival of new technologies, our laws and regulation should evolve to ensure all workers get the protections they deserve. But one-size-fits-all solutions like AB 5 go too far.

“The truth is there is nothing new about gig work”

Caitlin Vega - Legislative Director of the California Labor Federation

Employment status – the right to fair wages and workplace protections – should not depend on whether a worker is dispatched by a foreman, a phone or an app. Gig workers, like all workers, want economic stability, to provide for their families and have dignity on the job.

In the gig economy business model, workers provide services to companies that deny any responsibility for their welfare. Companies set the rates and the rules for how passengers or food get delivered. They deactivate drivers at will. Drivers are often kept in the dark as what they will earn, where they will drive, and what percent of the fare the company will keep. In what world is this a true independent contractor?

The truth is there is nothing new about gig work. Ask a construction worker who works at multiple jobsites. Ask an actor who is hired by the gig and can accept or decline each job. While these workers do temporary work for multiple companies, they are employees, protected by minimum wage and overtime laws, entitled to a safe workplace and workers comp if injured, and able to join unions and bargain collectively. Why wouldn’t we expect tech companies to follow the same rules?

“It doesn’t have to be one or the other, it can be both”

Jennifer Barrera - Executive Vice President of the California Chamber of Commerce

It is unreasonable to shoehorn a worker in the gig economy into a traditional employment classification based upon a court decision that resolved facts from over 15 years ago, did not involve gig workers, and applied a law that hasn’t been updated since well before the smart phone was introduced in our society. Employee protections such as meal and rest breaks and overtime, are meant to address an employment environment where the employer controls the schedule. Those protections are not applicable to the gig economy, where the worker completely controls when to work, for whom to work, and how long to work. The Legislature has an opportunity to create balance and provide reasonable protections for workers without eliminating the income opportunities the gig economy provides for those workers. It doesn’t have to be one or the other, it can be both.

“California can find a middle ground that provides part-time, independent and specialty workers with the safety net they need while maintaining the flexibility that many of them want”

Donna Lucas - CEO and President of Lucas Public Affairs

Our economy has changed quite a bit. There’s more demand for part-time, independent and specialty workers. Just look at what companies like Uber and Lyft have done to employ people in the gig economy. More and more workers have multiple jobs and employers, giving them greater flexibility and the freedom to take care of children or continue their education.

There’s a debate in Sacramento about how to treat these part-time and independent workers. As a small business owner, I think we need to allow independent consultants the ability to control their own schedules and provide specialty services to businesses. But we also need to ensure that all workers have access to basic benefits like healthcare, retirement and sick leave, because ultimately this will save us all money in the long run and it’s the right thing to do!

I think that California can find a middle ground that provides part-time, independent and specialty workers with the safety net they need while maintaining the flexibility that many of them want. The key is doing this without driving business expenses up to the point that employers stop hiring independent consultants, because then both businesses and workers suffers.

“We need to adopt new definitions and standards”

Chad Mayes - California State Assemblyman (R-Yucca Valley)

The first thing we must do is recognize that technology has, and continues to, fundamentally change work in the 21st century. The question asks that we apply outdated terminology to a new work environment that lawmakers and courts couldn’t fathom as little as 15 years ago. We need to adopt new definitions and standards that reflect these changes rather than try to apply outdated concepts to this new reality.

“One of the best strategies to expand job opportunities for part-time workers in the gig economy is to create “portable” benefits untethered from any particular employer or project”

Jesse Gabriel - California State Assemblyman (D-Los Angeles)

One of the best strategies to expand job opportunities for part-time workers in the gig economy is to create “portable” benefits untethered from any particular employer or project. Currently, many part-time gig employees are unable to access benefits and protections that traditionally have been provided to full-time employees, including health and life insurance, workers’ compensation, unemployment insurance, paid leave, and tax-advantaged retirement savings. Ensuring that part-time gig workers can secure such benefits – and retain them as they move between different jobs and employers – would help improve workers’ economic and financial security, increase mobility, and empower workers to pursue new and different employment opportunities. Providing reliable access to benefits – either through public sources or innovative private businesses – would help both workers and employers, and is an important step toward developing a regulatory regime that provides part-time gig workers with the flexibility they desire and the protections and benefits they deserve.

“We should follow the same standard applied nationwide by the federal government”

Tom Campbell - Professor of Law and Economics at Chapman University

To prevent adding to the cost of new jobs in California, we should follow the same standard applied nationwide by the federal government in deciding whether an employer has to withhold social security and income taxes. If a job is a contractor under federal law, it should be a contractor under California law as well. Then no state would have an advantage over us in offering people jobs.

Otherwise, we are making it harder for the job to be offered in California than in another state. A good example of how we already make it costlier to provide a job in California is overtime. In California, an employer must pay time and a half after 8 hours each day. The federal standard is that overtime starts after 40 hours in a week. A part-time worker might want to work 10 hours on a Saturday, while holding down another job during the week. Offer that job in California, and the company has to pay more than in Nevada.

Let’s not further drive jobs to other states.

“Workers are NOT robots – treat them with dignity, respect and fair play”

Catherine Lew - Co-Founder and Principal Consultant at The Lew Edwards Group

Workers are NOT robots – treat them with dignity, respect and fair play! App-based ride-sharing outfits (like Lyft, or Uber) or food delivery services (e.g., Instacart, Postmates) use hundreds of thousands of drivers to provide the services we rely on. But current loopholes allow some irresponsible tech titans to avoid providing a living wage, workers’ compensation, unemployment, and other essential employee protections by classifying workers as “contractors” in a race to the bottom. So called “gig” workers are hard-working Californians struggling to make ends meet or support their families – they are not disposable technology or robotic parts that can be used and set aside like yesterday’s app. We must level the playing field by updating outdated labor laws to require proper employee classifications and provide these new-tech workers the same protections other California workers have earned and deserve. Assembly Bill 5 – passed in the California Assembly and now being considered in the State Senate – accomplishes just that and is a great first step.

“Traditional companies should take a cue from the gig economy and make flexible work schedules the norm”

Debbie Mesloh - President of San Francisco Commission on the Status of Women

The gig economy has provided benefits to society offering new services, greater competition, and convenience. By giving control over when and how long one works, the gig economy unleashes the economic potential of women and others who previously not involved in the work force. That is at the heart of personal freedom and empowerment. Finding solutions such as portable benefits such as health care that are not employer dependent will help to ensure the viability and longevity of the gig economy for businesses, workers and society as a whole. Traditional companies should take a cue from the gig economy and make flexible work schedules the norm. When I served as Vice President at Gap Inc., we measured performance by metrics, not by time spent at the office. More women would join (or rejoin) the workforce or stay with their employers if they had increased flexibility and are not put in the position to choose between family and work.

“We need to acknowledge that they’re not the same as full time workers”

Steve Westly - Founder and Managing Partner of The Westly Group

Gig workers deserve fair pay and reasonable benefits. But, we need to acknowledge that they’re not the same as full time workers because they can come and go as they wish. California should learn from the best practices of Germany, Spain and Canada to set the national standard by:

1. Creating a “dependent contractor” classification for workers who fall somewhere between the definition of “employee” and “independent contractor.” The more an individual works for a company, the more protections and benefits that individual should receive. Companies should not be saddled with paying expensive benefits for someone who works sporadically to supplement his or her other income. At the same time if someone works close to full time, that person is entitled to receive basic benefits from that company, including health care and paid medical leave.

2. Creating a pooling system for workers’ compensation and unemployment benefits for people who do not work full time for one company, but instead work for multiple sharing-economy companies at once. Under this model, proposed last year by Sen. Mark Warner, every person gets basic protections, and no single company bears the entire burden to provide for that person, who may work for two or even 10 different companies in a single year.

“In the modern California economy, one size does not fit all”

David Townsend - Managing Partner at TCT Public Affairs

In the modern California economy, one size does not fit all, when it comes to employee vs. independent contractor. One must ask, what are we trying to achieve? Protect workers and insure that they get health benefits and unemployment insurance etc. or give workers the flexibility to work their own hours, from wherever they want and at what time they want to complete the work assigned. The current court decision is a drastic overreach that demands a legislative fix….and not a fix just for popular professions like emergency room doctors, but those in the film industry, graphic arts, and high tech. In my world, political campaign workers are virtually all independent contractors, individuals with their own business, working on multiple campaigns or a single campaign for a period of a few months and then on to the next campaign. That flexibility and efficiency needs to be maintained. It seems that skilled professionals should remain as independent contractors. We are no longer an assembly line worker state. People want fair compensation for their work and the government off their backs.

“Our legislation should focus on the real issue: protecting workers that are economically reliant on a single employer”

Chad Peace - Founder and President of IVC Media LLC

Existing employee/contractor court precedent, evidenced by the development of complex legal precedent, and AB5, evidenced by its numerous and industry-specific exceptions, may not be the best approach to deciding this issue.

At its core, what courts and the legislature are trying to prevent is companies (whether in the gig economy or not) from taking advantage of workers that are economically reliant on the immediate income provided by a particular company. This allows companies to take advantage of the workers and shift real long-term costs onto the “contractors.”

Our legislation should focus on the real issue: protecting workers that are economically reliant on a single employer. The true contractor has the power to price, the power to engage, and the power to disengage. Defining the difference by way of vocational exemptions is problematic and likely to lead to still more litigation.

“By providing gig workers the opportunity to save for retirement through CalSavers we will be improving their wellbeing regardless of their status”

Luisa Blanco Raynal - Associate Professor at Pepperdine University’s School of Public Policy

The discussion around whether gig workers should be employees or contractors should be reframed as how can we improve the wellbeing of such workers not only in the present but in the long term. One important area to consider is the area of financial planning for retirement. Independent contractors, in comparison to employees, lag behind in relation to their financial preparedness for retirement. According to data collected in 2017 by Prudential among 1,491 workers, while 52% of full-time workers have access to an employer-sponsored retirement plan, only 16% of gig workers (main source of income is their work as independent contractor) have access to one. Another 2018 survey conducted by Betterment among 1000 respondents, an online investment firm, found that 3 in 10 people who are gig workers have no retirement savings. Thus, policymakers should consider allowing gig workers to participate in the California state-sponsored retirement saving plan for employers who currently offer no retirement saving (CalSavers). CalSavers should follow the approach taken by the state of Oregon, which is moving forward with allowing independent contractors to participate in the state-sponsored retirement saving plan OregonSaves. By providing gig workers the opportunity to save for retirement through CalSavers we will be improving their wellbeing regardless of their status.

“California must embrace the promise of Opportunity Zones”

John Chiang - Former California State Treasurer

California must embrace the promise of Opportunity Zones. Established in the Tax Cuts and Jobs Act of 2017, Opportunity Zones utilize tax incentives to spur investment in 879 census tracts in California. Coupled with the entrepreneurial daring and creative genius of Californians, the financial investment serves as a springboard for the next generation of businesses in AgTech, AI, Biotech, housing and renewable energy - and the work these businesses will need to thrive.

“The gig economy is the new frontier of economic opportunity”

Maria Mejia - Los Angeles Director of Gen Next

The American dream is transforming, and while the explosion of the gig economy scares many, for millennials, low wage earners, and other workers that have been excluded from traditionally stable job markets, the gig economy is the new frontier of economic opportunity.

As such, rather than condemn it, California leaders should embrace the gig economy and its ability to provide vulnerable workers with the flexibility, freedom, and financial control they otherwise wouldn’t have over their lives.

To do so, we must first move beyond the current political debate and it’s fixation on preserving the status quo (it is already behind us!), and into more pragmatic dialogue about the long term value the gig economy provides us. We must think about how we can leverage emerging cohorts of workers in the job market for their unique strengths (vs exploiting their weaknesses), and create frameworks that support the worker from “contractor” all the way through entrepreneurship, and small business ownership.

This requires mature leadership on all sides, but if we get it right, we come infinitely closer towards achieving California’s true economic potential.

“We must uplift as we upskill”

Lenny Mendonca - Chief Economic and Business Advisor to Gov. Gavin Newsom

We must uplift as we upskill. As we redefine the opportunities of our workforce, we must also redefine the infrastructure in place to support our workforce, and we will do so through strategic partnerships. Innovation and quality jobs can go hand in hand; technological change and workplace justice can co-exist. California has always led the nation, and we will continue to lead as we address the challenge of our time: the future of work.

“California needs to crack down on employers who are abusing the system to avoid minimum wage regulations and fair labor practices”

Manuel Pastor - Director USC’s Program for Environmental and Regional Equity

As usual, California is “America fast forward”: our share of the workforce engaged as independent contractors in “gig” work is several percentage points above that of the nation. Because of this, we should also be in the forefront of providing workable solutions to the challenges the gig economy presents.

After all, gig work can provide needed flexibility for employer and employee alike – but its very independence is anathema to the collective bargaining employees can use to improve their wages and working conditions. Indeed, gig work often results from deliberate misclassification of those who should be deemed workers, a strategy undertaken so companies can save up to 30 percent on payroll costs. California needs to crack down on employers who are abusing the system to avoid minimum wage regulations and fair labor practices – and the recently passed Assembly Bill 5 aims to do that by laying out clear criteria for what an independent contractor is and is not. The bill is a particular challenge to ride-share and delivery companies who claim that their drivers are not actually doing work that is central to their business – huh? – and so legal and political resistance is to be expected.

Regardless of the outcome of that battle, we should acknowledge that gig work is here to stay – and that, in fact, debates about gig employment are really windows into deeper discussions about temporary, contingent, and other non-standard work in our new economy. Partly as a result, the state needs to work on providing portable benefits, including health care and retirement savings, for those who operate independently or are otherwise in non-standard employment. We should also welcome innovative civil society efforts to help verify gig work platforms as being better or worse for their workers, something that will also allow California consumers to exercise influence as well. We all do better when we all do better – and providing the right mix of flexibility and stability is key.

“We best provide job opportunities for part-time workers when the job includes both short term and long term financial security”

Monique Limon - California State Assemblywoman (D-Goleta)

For some, the gig economy allows them to participate and earn supplemental income. For others, the gig economy may be the primary and only source of income. The debate over whether employees should be classified as part-time workers versus independent contractors is founded on the concern that many independent contractors who participate in the gig economy struggle with poverty. This often times means choosing between health care, your next meal, or keeping a roof over your head. Part-time jobs can still be offered by the gig economy. We best provide job opportunities for part-time workers when the job includes both short term and long term financial security. This means considering employee welfare such as sick pay, social security, Medicare, workers compensation, unemployment, and disability insurance.

Dan Schnur, a veteran analyst and longtime participant in California politics, is director of the California Influencers series for McClatchy.
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