Work-Hating California Seeks to Stop Freelance Workers

JobsCalifornia has a well-deserved reputation for being unfriendly to business. Depending on what happens in Sacramento this year, the environment for workers could become unpleasant, as well.

An attack on workers’ freedom began nearly a year ago, when the California Supreme Court established a new legal standard for worker classification in its Dynamex ruling. Independent contractors must be considered employees and the companies hiring them must comply with the web of laws and regulations relating to minimum wage, overtime, payroll taxes, unemployment benefits, income tax withholding, and insurance plans.

Freelancers can be classified as independent contractors only when their work structure passes an “ABC test,” which sets an unreasonably high bar. Independent contractors cannot be supervised, they must be engaged in work the “hiring entity” isn’t otherwise involved in, and they must perform similar work for other hiring entities.

While the test has been applied a few times in court, it has not been codified into state law. That could happen during the current legislative session. Whatever Sacramento produces could potentially affect as many as two million contract workers across California. For many, it could mean the difference between being employed and unemployed, as well as the difference between being satisfied and unsatisfied with their jobs.

Support for codifying Dynamex comes from a belief that businesses are actively violating “employee rights” by misclassifying them as independent contractors. At least one lawmaker openly wishes to make things “more difficult” for companies.

“Individuals are not able to make it on three side hustles,” says Assemblywoman Lorena Gonzalez Fletcher, a Democrat in San Diego. “That shouldn’t be the norm. That shouldn’t be accepted.”

If the court’s decision becomes state law, “the norm” will be a reduction in work, disappearing opportunities, fewer dollars earned, and diminished free agency for those who’d rather, and in some cases have no choice but to, work in the gig economy.

While politicians argue without evidence that the gig economy is “rigged,” and want employment affiliations to be dictated by the court’s guidelines, almost all independent contractors prefer the work arrangements they have set up for themselves. The Bureau of Labor Statistics has found that “fewer than one in 10 independent contractors” would choose traditional work environments over freelancing.

Faced with the likelihood of losing their autonomy, independent contractors are already leaving jobs. The entire staff of independent barbers at Bottle & Barlow, a hipster barbershop on R Street in Sacramento, walked out in September when the shop reorganized its business to meet the court’s ABC requirement. Shop owner Anthony Giannotti, who said the Dynamex ruling “really gutted us,” explained why barbers — and other independent contractors — are at a disadvantage under a Dynamex framework.

“Something that attracts most of us to this industry is the freedom,” Giannotti told the local media. “I don’t want to have a boss above me telling me what to do and that’s kinda what the state’s forcing us to do now.”

Tina Kerrigan, a dietary consultant who contracts with Southern California nursing facilities, assisted living homes, and hospices, also sees unwelcome change ahead. She told the San Gabriel Valley Tribune last fall that if she is classified as an employee, she expects to “lose all of my flexibility and I’d see about a 30 percent drop in pay.”

The future of newer, innovative companies, which drive economic growth, would also be bleak. Uber, Lyft, TaskRabbit, DoorDash, Instacart, and other entrepreneurial enterprises that have successfully followed business models requiring contract workers could find their plans might no longer work under a Dynamex regulatory regime. Even if they adapt, they will be forced to shift resources that would otherwise be dedicated to research, development, and consumer demand to compliance exercises.

Transitions will be costly. A UCLA study found that companies retaining independent contractors save “between 29 and 39 cents for every dollar” of earnings they pay out. While some argue that’s a downside of the gig economy, it’s in reality one of its advantages, because it makes companies more profitable, an outcome that should be universally supported. As Austrian economist Ludwig von Mises wrote, “a profitable enterprise tends to expand, an unprofitable one tends to shrink.”

While it’s possible gig economy companies will remain profitable, should the Dynamex decision become California law, profits will fall, which means expansion will be contracted. Is it that what lawmakers want?

Those hoping to codify Dynamex claim they’re simply trying to protect workers. But they’re more likely serving the interests of unions, which would rather trap workers under their boot than see them employed independently.

This article was originally published by the Pacific Research Institute

Youth tackle football targeted for ban in California

Two California lawmakers want to outlaw tackle football leagues until teenagers reach high school, saying delaying the start of high-contact elements of football would protect young people from long-term brain damage.

Children can learn the skills they need to succeed at the sport from non-contact flag football, Democratic Assembly members Kevin McCarty of Sacramento and Lorena Gonzalez Fletcher of San Diego said in announcing their legislation on Thursday.

Their bill follows similar legislation under consideration in Illinois and New York. Legislation has been introduced several times since 2013 in New York but has not gained traction.

In Illinois, the Dave Duerson Act to Prevent CTE is named for the Chicago Bears defensive back who was diagnosed with chronic traumatic encephalopathy after he killed himself at 50. …

Click here to read the full article from the Sacramento Bee

Bill is Back to Remove “Tampon Tax” – Will Raise Liquor Tax to Cover Costs

SACRAMENTO – In his veto message of a series of tax-reduction bills last September, Gov. Jerry Brown explained that “tax breaks are the same as new spending – they both cost the general fund money.” He said such measures should be on the table during budget negotiations, “so that all spending proposals are weighed against each other at the same time.”

Among the bills that were vetoed at that time were two that would have repealed sales taxes on diapers and tampons. Both measures passed unanimously, but the governor wanted to assure that new spending-related measures didn’t lead to deficits. So the authors of those two measures are back again this year – but this time they are addressing the revenue issue.

The Common Cents Tax Reform Act, Assembly Bill 479, would “exempt diapers, tampons, pads and other basic necessities from California’s sales tax,” according to a statement last week from its authors. The February version of the bill would have exempted sales taxes from the sale, storage and use of various physician-prescribed medicines, but was amended to target diapers and feminine products.

To deal with the governor’s concerns, its co-authors (Assembly members Cristina Garcia, D-Bell Gardens, and Lorena Gonzalez Fletcher, D-San Diego) want to raise taxes to offset the tax cut. The bill would increase the excise tax by $1.20 per gallon on hard liquor that is 100 proof and and by $2.40 a gallon for liquors that are more than 100 proof.

They estimate the tax increase will add about 1.5 cents per gallon to the typical hard-liquor serving and say that it’s a modest increase, but the tax rate would be boosted by more than 36 percent – raising it from $3.30 a gallon to $4.50 a gallon. The state’s excise taxes, however, would remain the same on the sales of beer and wine.

“Common sense is that liquor is a choice and a luxury and human biology is not,” said Garcia, who authored the tampon-tax bill last year. “There is no happy hour for menstruation. Our tax code needs to reflect the fact that it’s not OK to tax women for being born women.” Gonzalez Fletcher, who had authored the diaper-tax measure, depicted the matter as one of “babies over booze.” Because the bill requires a tax increase, it will need two-thirds supermajority support in the Legislature.

But opponents of the legislation caution against using the tax code to favor some goods over others. “Taxing drinks to reduce the taxes on other consumer goods is folly – not least because retailers will mark up diapers and feminine care products to their current price,” said Kevin Kosar, a senior fellow of the R Street Institute in Washington, D.C., and author of the 2016 book, “Moonshine: A Global History.”

“Drink taxes should only cover the social costs they produce – not expenses attributable to normal bodily functions like defecation and menstruation,” he added. “What’s next – taxing drinks to pay for toilet paper and fingernail clippers?”

This is likely to become a partisan issue. Some California Republicans supported previous efforts to reduce taxes on diapers and tampons, figuring any tax reduction is a good thing. Likewise, many Republicans generally took issue with the governor’s statement equating tax cuts as spending. If a cut is the same thing as a spending hike, then it implies the government – rather than individuals – is the steward of all income. But they appreciate Brown’s insistence the budget remain balanced, which means any diversion of revenue has to be made up somewhere else.

California Democrats are jumping on a national “gender equity” campaign designed to reduce the prices of feminine products and other necessities. For instance, the Washington Post reported that New York’s Democratic Gov. Andrew Cuomo last year signed a law exempting sales tax from tampons and Washington, D.C.’s Democratic mayor signed a law that also removes the tax from diapers. Cuomo blasted the tax as regressive – meaning it hurts the poor the most – and called it a “matter of social and economic justice.”

Assembly Bill 479 isn’t the only recent effort to rearrange the tax code to favor in a targeted manner. “The Teacher Recruitment and Retention Act of 2017,” introduced by Democratic state Sens. Henry Stern, D-Agoura Hills, and Cathleen Galgiani, D-Stockton, would exempt public-school teachers from paying state income tax on their teacher salaries if they stay in the field for at least five years. The goal is to address a shortage of classroom teachers.

The diaper/tampon exemption would be revenue-neutral because of the corresponding booze-tax increase, but the teacher exemption is estimated to cost more than $617 million a year. Although the state’s highly progressive tax code already is filled with special privileges for some and higher tax rates for others, critics worry that this new spate of tax exemptions could spark a frenzy of similar bills, and the slow expansion of state tax exemptions from one favored group to another.

When Gov. Brown vetoed seven tax bills last year, he noted that their cumulative effect would be to reduce revenues by around $300 million. He cautioned about cutting such revenues “when the state’s budget remains precariously balanced.”

Although there’s disagreement on the likelihood of new deficits, there’s little question that California’s budget remains as precarious as ever. That gives the teacher exemption a huge obstacle – but it’s unclear what the governor might do if AB479 passes now that supporters of the tampon and diaper exemptions identified a tax hike to make up for lost revenue.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece was originally published by CalWatchdog.com