Protect Your Right to Be an Independent Consultant!

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Strong winds of change are blowing in our direction. As self-employed professionals, the new California law, AB5, has made it even more difficult to be hired as an independent contractor and paid on a business-to-business 1099 tax basis.

The law largely sprang from a desire to protect lower-wage gig economy contract workers, such as those working for ride-sharing companies Uber and Lyft. But the law’s strict definition of who qualifies to be an independent contractor has cast a wide net over many types of professions, including ours.

Other Democrat-controlled states are considering similar bills now, including New York, New Jersey and Illinois, according to The Washington Post.

And it’s not just at the state level. The U.S. House of Representatives already passed HR2474, referred to as the PRO Act.  Although designed to enhance rights to unionize, the bill — if passed by the Senate and signed into law — ultimately would force potentially millions of freelancers and self-employed professionals to be classified as employees and paid on a W-2 tax basis.

Obviously, the AB5 state law and pending federal legislation like the PRO Act are an alarming trend for those of us who choose to be self-employed. And just because AB5 is now law doesn’t mean the fight is over. In the last several weeks, 34 separate pieces of legislation related to AB5 have been introduced in the Legislature and several lawsuits have been filed. (The L.A. Times)  We need to be vigilant and continue to take action!

Why Is This Happening?

Several trends are coalescing:

  1. Labor union membership is at a record low. They were created to advocate for and protect workers, particularly lower income workers. The Bureau of Labor Statistics released data last month showing union membership has fallen to a record low. This means that union dues are also at record lows. Naturally this is bad for the union business; they need to increase membership. More union members mean more union dues which means bigger budgets.

  2. Union backing helps to drive (and fund) political careers. With 100-plus years of experience in organizing and lobbying, unions are exceptionally good at influencing politicians, and they have the money to do it. In the 2016 election cycle, the labor sector contributed more than $217 million to races nationwide, with nearly 90% of their contributions going to Democrats.

  3. Increasingly, the government is trying to regulate what we can and can’t do. I’m not a political person, but I’ve begun to notice an increase in regulations that are supposed to protect me as an individual. Of course, some laws are important like Section 5 of the Federal Trade Act that ensures that consumers are not deceived. But others assume that I’m not a mature adult who can make decisions in my own best interest. For example, in 2013 New York City passed a law that prevented me from buying a sugary soda larger than 16 ounces. (The state’s highest court struck down the law in 2014.)

California’s AB5 law strikes me as the same type of regulation. It implies that I’m not capable of taking care of myself so I should be an employee. But in seeking to “protect me,” laws like AB5 instead restrict my ability to earn my living as an individual, which also restricts my tax deductions and retirement options. (PICA’s 2-minute video explains why “Friends don’t let friends W-2.”TM )

What To Do About It!

As self-employed individuals we’re not very well organized, especially considering who we are up against — the unions and their Democratic friends. (Did you know that the author of AB5, Assemblywoman Lorena Gonzalez, was the CEO and secretary-treasurer of the San Diego chapter of AFL-CIO in 2008?) Every one of us needs to take action to protect our right to be self-employed. We need to make ourselves heard and keep up the pressure.

Here are easy things to do that should be well within your comfort zone as a consultant. They don’t take very much time.

1.     Join an association (or two) that have the resources to advocate on our behalf. I recently joined these three to help fund their advocacy efforts.

  • The Association of Independent Workers (IPSE-US) for $99

  • The National Small Business Association (NSBA) – free to join, focuses on national issues

  • The National Federation for Independent Business (NFIB) – minimum dues of $195, focuses mostly national issues

2.     Send letters to your state legislator, especially if you live in a blue Democratic state. Yes, that’s plural hard-copy letters because they are harder to ignore than emails, especially in massive quantities. We’re not trying to get a response; we want to make an impression! Here is some sample text for those of you in California.

Hello.

As one of your constituents I urge you to join the fight against AB5 and support SB-806. I am an independent consultant and AB5 threatens my ability to make a living! I choose to be self-employed and I have the right to earn my living on my own terms as a small business. If AB5 continues to stand as-is, I will be voting for someone else next term.

Sincerely,

To make it easy, print a few dozen letters at a time and print a sheet of mailing labels. Then drop a letter in the mail every few days.

Get the name of your California state legislator here and their address here.

If you’re in a Democratic state other than California, similar legislation is likely coming your way! Start mobilizing now. Find your state representative here and send them letters too. Use the text above but replace AB5 with your state’s info. For example, in New Jersey, the bill similar to AB5 is S4204. Other states like New York don’t yet have their bills numbered, so change the wording to say, “I urge you to vote against any new proposals similar to AB5 in California, or anything that further restricts the definition of an independent contractor such as the ABC classification test.”

In addition to the above, if you’re in California, continue to fight against AB5 and support its proposed amendments like SB-806. (Given the Democratic super-majority, a full repeal is extremely unlikely but we may be able to amend it.)

A.    Join and follow the Facebook group Freelancers Against AB5. New developments and ways to fight back are shared daily. Everyone knows there is strength in numbers, so let’s unite there!

B.    Meet with your local representative and explain how the law is affecting you. One PICA member recently met with a staff member in her district. “It was eye opening for him. I passed along examples of where the language is problematic and unworkable, along with a list of nearly 300 professions affected. It’s been passed to the legislative director. He suggested I fly to Sacramento to meet with [the assemblywoman], but I’m going to see if I can get a video meeting, especially in light of the coronavirus.” Contact me if you’d like to leverage the info this PICA member is using.

C.    Contact your local Chamber of Commerce and/or the statewide California Chamber of Commerce and ask them how to create a carve-out exemption for consultants. AB5 has 57 carve-outs for various professions but consulting isn’t one of them (yet); new ones are now being proposed.

D.    Call, fax or write to Gov. Gavin Newsom’s office using the sample text above.  

Governor Gavin Newsom
1303 10th Street, Suite 1173
Sacramento, CA 95814
Phone: (916) 445-2841 / Fax: (916) 558-3160

3.     Most importantly, VOTE!  Many state legislators are up for re-election. Make sure you know where the candidates stand on this issue before you cast your ballot. (This chart shows how the California Assembly voted for AB5. If your representative is a Democrat, they voted in favor of AB5. See point #2 above as to why this is happening.)

Bottom line, pay attention to the winds of change and take action! AB5 and other proposed legislation around the country threatens our ability to make a living as self-employed professionals. It’s time to step forward and tell our legislators we choose to be self-employed and we can think for ourselves!

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