Here’s what you need to know…
California is once again making waves by laying down a key policy marker in the form of Assembly Bill 5 (AB5), which last month was signed into law by Governor Newsom. The law aims to reshape the gig economy and what it means to be a worker in the 21st century, but its implications will go well beyond Uber, Lyft, or whichever other platforms you may use out of convenience (or to make some extra money yourself) in daily life.
AB5 changes California employment law to limit companies’ usage of independent contractors, leaving companies and workers across the country scrambling to determine how it impacts them, whether and how they can push back, and if similar measures may be coming in other states. Here’s what you need to know about AB5 and what might come next in this clash between the 21st century gig economy and 20th century regulatory frameworks:
- What Is AB5? Assembly Bill 5 codifies and expands a 2018 California Supreme Court decision making it more difficult to classify workers as freelancers. AB5 requires the reclassification of gig economy workers to employees instead of contractors. As noted by the American Action Forum (AAF), whether a worker was an employee or a contractor was previously determined by evaluating several factors such as how they were paid, their work hours, investment in work equipment, and the extent to which the employer could control the worker and the way the work is done – as is done at the federal level across the U.S. AB5 reverses the existing framework by assuming workers are employees unless they meet three specific criteria, known as the “ABC test.” The law takes effect on January 1, 2020.
- Why Flip The Script On The Existing Contractor – Employee Classification? The new law seeks to address the idea that employers are classifying workers as contractors in order to reduce compensation and benefit costs, as well as legal requirements like unionization, payroll taxes, and insurance coverage. This factor motivated the law’s support among organized labor, some gig economy workers, and Democratic presidential candidates like Bernie Sanders, Elizabeth Warren, and Pete Buttigieg.
- Implications For Workers: The shift to employee status could mean minimum wage protections, overtime, workers’ compensation, sick and family leave, employer contributions to Social Security and Medicare, and mileage reimbursement. However, such benefits would not come without a cost. Gig workers could find their flexibility and hours limited, resulting in less money and opportunity or required working hours that don’t align with their preferences, to say nothing of the costs of complying and figuring out the appropriate classification of certain “gigs” they may have.
- Implications Far Beyond Ridesharing: While companies such as Uber, Lyft, Doordash, Instacart and other technology companies come to mind when thinking of the gig economy, the ramifications of AB5 are actually much broader. Despite some professions receiving carve-outs, the bill has the potential to change the status of 1 million workers in California, ensnaring those in non-tech jobs such as yoga teachers, barbers, truck owner-operators, paper carriers, freelance writers, and more. Yet, some of the main targets of the legislation – the popular, tech-centric ridesharing companies – suggest that their businesses don’t fall under the law’s legal framework at all, and are preparing to counter its enforcement.
- Companies Are Taking Their Case To The Voters In 2020: After unsuccessfully trying to influence lawmakers for a more favorable regulatory framework (including a $21 minimum wage in the Golden State), Uber, Lyft, and Doordash are taking the lead in challenging the implementation of the law (and its application to their businesses). Each company has pledged $30 million each – $90 million total – to fund a ballot measure to make their case directly to voters to exempt gig workers. An Uber executive stated that these funds will go toward hiring “the best campaign team and best advisors we possibly can to run a successful ballot initiative.” As other companies and states wonder if California Attorney General Xavier Bercerra’s assertion that “as California goes, so goes the nation” is indeed true, there will likely be significant resources – both from labor and businesses – poured into influencing the outcome of the 2020 ballot initiative.
The passage of AB5 into law may mark the end of the beginning for the wild frontier of the 21st century gig economy, and how it is implemented and challenged will determine its effect on policy and regulatory frameworks in other states. An analysis by AAF’s Isabel Soto estimates that the implementation of AB5’s “ABC test” nationwide would impact “over 13 million workers who produce over $1.6 trillion in economic output, about 8.5 percent of gross domestic product.” If such is the case, many companies and industry groups may find an investment in California’s 2020 ballot initiative now to be an appealing strategic decision for later.
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THE SELFIE STRATEGY
While Sen. Elizabeth Warren may not know the definition of a selfie, she definitely knows how to use them to her advantage. Ending every campaign rally with a well-executed selfie line, her campaign staffers snap pictures of the candidate with voters, and the lines keep getting longer and longer. At a recent rally in New York, Warren spent four hours taking about 4,000 pictures, bumping up her total tally to more than 59,000 selfies since she kicked off her campaign.
Warren’s strategy strives to build individual connections by creating original digital content and gaining free advertising in the process as her supporters excitedly post the pictures to social media. As one political strategist pointed out, 4,000 selfies multiplied by an average social network of 150 people equals 600,000 viral impressions just from one rally. As recent polls show, this grassroots strategy just may be working, and may change the way candidates approach campaigning well into the future.
ACTIVISM CLOSURE OR OPENING?
It was a slow day in the office for many on September 20th as people skipped work and businesses shut down to participate in the youth-led Global Climate Strike. According to the American Sustainable Business Council, more than 450 businesses either gave workers the day off, closed stores, or halted manufacturing. In addition, over 7,000 companies participated digitally by giving ad space to promote the strike, and thousands of tech workers staged walkouts.
Companies condoning and even encouraging participation in this strike marks a new level of corporate employee activism that has not been seen at this large of a scale before. If more and more companies leverage their corporate brand, reputation, and resources on public policy issues, it may succeed in influencing elected officials to support particular policies as they seek to gain political (and financial) support. Also, it may enable more employee activism, which could turn on the employer itself and lead to potentially negative implications for employees.
CUE THE BREAKUP PLAYLIST
A love story that reached its peak during the Obama Administration is now headed for a nasty divorce. Once the party of Big Tech, Democrats are now attempting to break away from Silicon Valley as a “techlash” gains popularity. Mark Zuckerberg has even gone so far as to call an Elizabeth Warren presidency an “existential” threat to Facebook due to the Senator’s calls to break up the company.
However, some Democratic presidential candidates are still wooing Silicon Valley while continuing to publicly attack it. With regulatory scrutiny and the breakup of Big Tech now safely a bipartisan issue, this reality may ironically present an opportunity for Big Tech to strategically engage with policymakers from across the political spectrum to favorably influence whatever regulatory outcomes may come – without being viewed through a partisan lens and the baggage it can bring.
As Amazon and HBO proved at the Emmys, streaming services have dramatically changed Hollywood, but the streaming wars have done a lot more than shakeup awards shows. In an effort to develop original content local to their global viewers, streaming giants are spending billions on content producers in foreign countries – using local languages and storylines – which has resulted in the creation of “mini-Hollywoods.”
These new production regions are popping up in places such as Croatia, Serbia, and in Latin America, with Hollywood investment lured by large tax incentives and low labor costs. Besides attracting cash and tourism to host countries, these streaming-enabled “tinseltowns” have disrupted the traditional Hollywood model by creating a unique competitive advantage: highly-localized content that can be quickly leveraged to become the next global hit, thereby at once capturing more subscribers around the world while reducing operating costs.