AB 522 Defends Independent Contractors by Repealing AB-5, Protects Small Businesses from Frivolous Lawsuits, and Imposes Transparency and Accountability on Labor Unions
Assemblyman Carl DeMaio is taking action to protect small businesses and independent contractors from the damaging effects of overreaching state policies with his new bill, AB 522, the “Freedom to Work Act.” This crucial reform seeks to undo the harm caused by California’s restrictive labor laws, particularly AB 5 (2019), which has severely limited businesses’ ability to hire independent contractors and the Private Attorney Generals Act (PAGA) that has resulted in costly predatory lawsuits.
AB 522 restores flexibility, offering Californians the opportunity to work on their terms without unnecessary regulatory barriers.
In addition, AB 522 addresses the flood of frivolous lawsuits under the PAGA, which have drained resources from small businesses and hindered their growth. By curbing these costly and unnecessary legal battles, the bill enables businesses to focus on creating jobs and expanding, rather than spending valuable resources on litigation. The bill also ensures greater transparency and accountability in labor unions, making sure their primary focus remains on workers’ rather than political agendas.
By reversing the negative impacts of AB 5 and PAGA lawsuits, AB 522 will restore fairness to California’s workforce and economy. The bill empowers small businesses, creates more job opportunities, and strengthens protections for independent contractors, all while ensuring labor unions are held accountable.
DeMaio provides the following statement explaining the importance of passing AB 522:
“California used to be the best state for someone to start their own small business and become part of the American Dream – but predatory laws like AB-5 and PAGA have dashed the dreams of our entrepreneurs by banning independent contracting and authorizing frivolous shake-down lawsuits against small businesses. My bill would make Californian a Freedom to Work state by allowing independent contractors to thrive and protecting small businesses from costly frivolous lawsuits. Finally, my bill requires full transparency on labor union use of member funds and holds them accountable for winning and maintaining true support from the workers they claim to represent.”
KEY PROVISIONS OF AB 522:
- Allows Use of Independent Contractors: Repeals AB 5 (2019) and allows for businesses to hire independent contractors without having to classify them as employees.
- Stops Frivolous Lawsuits: Repeals PAGA and puts an end to the frivolous and lucrative lawsuits that were crippling small businesses, while the money was going to the pockets of attorneys.
- Transparency for Unions: Employee organizations will be required to notify members of their membership costs every year, and will lose certification if the organization fails to represent 60% of eligible employees. Union members will be prohibited from performing union duties during work hours.
Related on AB 5
Jan 23, 2024 – Sanchez to Introduce Bill to Repeal AB 5
Here are some of the key takeaways:
- Despite AB5 proponents’ claims that the law would increase full-time employment and offer benefits and protections, the researchers found “robust evidence that AB5 is significantly associated with a decline in self-employment and a decline in overall employment.”
- AB5 reduced the level of self-employment by 6.7 percentage points to 28%.
- AB5 reduced the level of overall employment by 7.3 percentage points to 14%.
- The researchers did not find significant evidence that AB5 increased W-2 employment.
- Even in cases where the researchers noted an increase in W-2 employment, this increase was not weighty enough to offset the significant decreases that occurred in self-employment.
- There is also some evidence that AB5 is associated with a decline in the labor force participation rate. AB5 reduced the level of labor force participation by 6.5% – 7.6%.
- Palagashvili polled small businesses through the SBA (Small Business Administration) and she discovered that while there were some instances where the independent contractor chose not to take on work, there were a prevalence of cases where the businesses could not hire the IC because of the lack of clarity and fear of liability from the AB5 law. Some businesses were forced to shut down completely because they were no longer able to hire independent contractors. The study shows that self-employment fell 10.5%. AB5 resulted in both a chilling effect and a tangible reduction of labor, and women independent contractors, entrepreneurs, and small business owners have been severely impacted. The freelance transcriptionist industry as well as online tutors are among the female-dominated professions that have suffered under the California law. Many of these ICs had to leave the state in order to maintain their freedom to work as they chose.
Republican Lawmakers, Small-Business Advocates Work to Protect Independent Contractors
Proposals would repeal AB 5, cancel Biden independent contractor rule.
SACRAMENTO – Today, Republican lawmakers, including Assembly Republican Leader James Gallagher (Yuba City), Rep. Kevin Kiley (Rocklin), Asm. Kate Sanchez (Rancho Santa Margarita), joined business advocates Tom Manzo from the California Business & Industrial Alliance and Matthew Estipona of the Associated Builders and Contractors to announce new efforts in their fight to protect independent contractors. In the California Legislature, Asm. Sanchez will introduce legislation to repeal state limits on contractors imposed by AB 5, while on the federal level, Rep. Kiley will challenge the Biden administration’s new rule that creates national restrictions on independent contracting.
“Here in California, we’ve seen firsthand the disastrous consequences of AB 5. Joe Biden and Julie Su’s efforts to expand it nationwide will destroy the careers of millions of hardworking independent contractors,” said Gallagher. “We should be helping and encouraging people to start businesses and build careers – this Biden/Su proposal does the exact opposite.”
Gavin Newsom and Julie Su’s AB 5 severely restricted independent contracting in California, destroying many livelihoods and harming California’s economy. As Acting Secretary of Labor, Su and the Biden Administration have announced a new Department of Labor rule, which was modeled after AB 5 and will cost millions of independent professionals across the country their livelihoods while restricting the ability of millions more to have flexible work arrangements.
When the Department of Labor submits the rule to Congress, Rep. Kiley will introduce legislation under the Congressional Review Act to nullify this harmful regulation. Last year, Rep. Kiley chaired a hearing of his Subcommittee on Workforce Protections examining the impact that AB 5 had in California.
“Nationalizing California’s AB 5 would cost millions of Americans their livelihoods. I am urging my colleagues on both sides of the aisle to support my legislation to overturn the Department of Labor’s new rule and protect the right to earn a living and the American Dream,” said Rep. Kiley.
“There are few things more American than starting your own business and working for yourself,” said Asm. Sanchez. “It’s a big part of the American dream. For too many Californians, that dream was ripped away by AB 5. That’s why I’m introducing legislation to fully repeal AB 5 and help restore the tens of thousands of jobs that law needlessly destroyed.”
Governor Signs AB 5 to Stop Misclassification and Protect Millions of Workers
Sep 18, 2019 — Governor Gavin Newsom signed into law legislation authored by California State Assemblywoman Lorena Gonzalez (D-San Diego) to restore employment status for millions of workers who have been misclassified as contractors.
Assembly Bill 5 provides clarity for businesses, workers and taxpayers in the wake of the Dynamex ruling by the California Supreme Court in 2018.
“Today, we are disrupting the status quo and taking a bold step forward to rebuild our middle class and reshape the future of workers as we know it. As one of the strongest economies in the world, California is now setting the global standard for worker protections for other states and countries to follow,” Assemblywoman Gonzalez said.
More than a million Californians have been misclassified by employers looking to cut costs at the expense of workers. Companies relying on this illegal business model decimate the state’s worker safety-net programs, undermine fair competition, and subject law-abiding businesses to unfair competition.
Ultimately, when workers without protections are laid off or cannot find work, get sick or injured on the job, or they retire, taxpayers end up bearing the costs of supporting them. The state’s Division of Labor estimates that the misclassification of workers results in an estimated annual payroll tax revenue loss of $7 billion per year.
By applying a strict test to determine who is an independent contractor and making employment status a default under the law, working Californians who have been kept off payroll as employees will gain access to basic labor rights for the first time, including rights to minimum wage, overtime, unemployment insurance, workers’ compensation, paid sick days, paid family leave, workplace protections against harassment and retaliation, and the right to form or join a union. Some of the many workers who will benefit include janitorial workers, construction workers, port truck drivers, home health aides, hotel and hospitality workers, delivery and ride-hail drivers.
The unanimous, bipartisan Dynamex decision handed down last spring by the California Supreme Court was one of the most important workers’ rights advances in a generation with the potential to bring many workers into employee status, which offers more stability and security and the opportunity to organize. AB 5 codifies and clarifies this decision and will take effect on January 1, 2020.
Related
- Dec 27, 2023 – New Laws in California 2024
- Jan 29, 2020 – Hundreds Rally to Repeal AB 5
- Sept. 11, 2019 – AB 5: Gig Economy Bill Heads to Governors Desk
