So, there’s a new bill in California, Assembly Bill 5, that’s doing immense harm to freelancers across the state and throughout the country. The bill was intended to prevent tech companies from taking advantage of their employees by branding them as freelancers. But the thing took too wild a swing, and a lot of people have gotten hit by it.

We’re going to talk about how and why, but let’s get one thing straight, right off the bat:

We absolutely need something to help workers in this country. When we talk about why AB5 doesn’t work, I want to be very clear that I’m not turning my nose up at the idea of something like it. Rather, it’s this specific law that’s hurting a lot of people.

Let’s take a quick review at the environment that gave rise to Assembly Bill 5:

We live in an incredibly rough economy for most people. The stock market is doing phenomenally! But the stock market isn’t the same thing as the economy. The economy is made of people who are barely getting by, propping up a class of billionaires who are hording an amount of wealth that is increasing at a mind-boggling pace, instead of “trickling down”.

Productivity and wages used to rise together, but they got divorced in the 70s, and productivity’s been doing a lot for herself while wages have just sort of lazed around on the sofa, getting drunk. Productivity has grown 6 times more than pay since 1979. In the last ten years, the costs of education, housing, and medical care have ballooned, while the minimum wage has held steady at $7.25/hour. Not only is this financial climate hard for the average American, it’s going to be hard for a LOT of people, when the purchasing power of the middle class dwindles away to nothing and the bottom drops out of the whole contraption.

And there’s plenty of room for it to keep dropping! Because it turns out that a LOT of tech’s “innovation” just means “circumventing labor laws in ways that nobody’s made illegal yet”. Sometimes the tech world finds cools ways to get money and opportunities to people. Think of crowdfunding, or subscription services like Patreon that let middle-class artists do their thing sustainably.

But often, you instead wind up with companies like Uber, Lyft, and Favor. Rideshare apps view their drivers several different ways. They tell the government that they’re independent contractors. Drivers often claim that they’re running a small business, with the rideshare app’s help. Internally, (and to the SEC) they think of their drivers as the customers. The people who call for rides aren’t the customers—they’re the product that the app delivers to their customer, the driver.

What all of this means is that rideshare companies don’t have to pay minimum wage. They don’t have to offer benefits, like time off or healthcare. If the people who work for you are your customers, instead of your employees, you don’t have to take care of them the same way. (Funny how that works out, right?)
And in some ways, I can see the temptation to do things this way. Insurance is expensive, and it’s kind of wild that we make employers pay for it. Somehow saddling small businesses with that expense is considered the “conservative” option; I’ll never understand how that’s supposed to be good for the market. We’re the wealthiest nation in the world, and yet we’re just about the only country that puts the burden of healthcare on business owners instead of the government.

But here’s the thing: That’s how health care works in this country! It’s what we have. We have a public option, technically. But it’s been systematically gutted to the point of uselessness, intentionally, by people who resent it being passed in the first place. So until we get some kind of national healthcare system, it’s on business owners to make sure that their employees don’t die because they can’t afford medical care. That’s the law, and that’s the ethical thing to do in our current situation.

And tech companies tend not to like that. So we get situations like Uber, where people who are clearly employees are being framed as literally anything else. Because the companies hiring them would rather burn millions trying to render their employees obsolete than spend that money keeping them alive. (Fun side note: Remember when one of those self-driving cars killed a woman because Uber forgot to tell their AI that humans can exist outside of crosswalks?)

And just like I understand why companies would try to dodge those costs (even if it’s clearly wrong), I also understand what AB5 was trying to do. They’re trying to close that loophole. They’re trying to stop companies from BSing about who is an employee and who isn’t. That makes sense.

So the bill defines freelancers with help from a court case, Dynamex Operations West, Inc. v. Superior Court (2018). The main features are

1. Is the worker free from the control and direction of the hiring entity. Is the person who hired them telling them where, how, or when to do the work?
2. Is the work being performed outside of the normal course of business for the hiring entity?
3. Is this work that the worker normally does, independently of this one business relationship? Do they genuinely have their own business in this field? Or is this “freelancing” something they’re just doing for one company?

You can immediately see some huge questions raised here. Among them:

– How strict do you define “telling someone how to do their work?” Because I’ve never had a creative assignment that didn’t come with some sort of deadline, right?
– How do you define “the normal course of business?” The normal course of business for a magazine involves hiring dozens of writers to write hundreds of pieces. Does that stable of writers suddenly get smaller if you can’t afford to give them all benefits?

And we’re already seeing fallout from this. Large multimedia platforms, from Vox to CollegeHumor, are laying off huge swaths of their staffs. Under the new law, writers aren’t allowed to submit more than 35 pieces in a year and still be considered freelancers. That means that these outlets were going to have to either cast a much wider net for their bullpens, or cut their staff and focus on a core group of (presumably grotesquely-overworked) people. Unsurprisingly, they chose the latter pretty universally.

And it’s not just writers. Musicians are getting hit, too. A petition to secure an exemption is nearing 50,000 signatures on change.org. Any creative endeavor other than “a day job with a desk at Disney” is going to involve a network of people floating in and out as projects start and end. There’s a lot of room for exploitation, and there’s a lot of room for quashing that exploitation. But right now, this bill is mostly just putting people out of work.

And just like California’s (much-needed, fantastic) privacy protection laws are having an impact across the country, (because you never know if the data you’re collecting is on a Californian!) so too is their (terrible) freelancing law rippling out. Because work doesn’t happen in offices anymore. It happens everywhere. I recently released a song with musicians from six countries performing on it. That wasn’t even something I was trying to do. That’s just where my friends were!

Now, my piece was just me getting together with some friends to have fun. But professional recordings happen that way, too, all the time. And right now, if the person on either the hiring or performing side of that equation is in California, that relationship is in jeopardy.

And of course, the really fun thing is, that a lot of the industries that were intended as targets of the bill are sidestepping it with court challenges. And many industries lobbied for exemptions, meaning that real estate agents, CPAs, lawyers, surgeons, referral agencies, and lots of others were exempt from the get-go.

So what we’re left with is a law that’s meant to protect people. But many of the people it should’ve protected aren’t covered by it. And many legitimate freelancers are getting screwed out of business relationships that they used to rely on. The big publications that they used as cash cows to pay their bills are either capping them at 35 articles, or letting them go altogether. It’s not hard to see that this is wildly misguided, and that it’s causing more harm than help. We’ve got to pump the brakes on AB5 and try to figure something else out.

Taking action

Following the compromise of consumer data from credit reporting bureau Equifax, Senator Elizabeth Warren (D-MA) and Senator Brian Schatz (D-HI) have introduced the Freedom From Equifax Exploitation (FFEE) Act.

This act aims to give consumers more rights more control over how credit agencies use their data.

The bill

The bill is available here, but here is a few of the bill’s highlights:

• Create a uniform, federal process for obtaining and lifting a credit freeze.
• Preventing credit reporting agencies from profiting off the use of consumer information for the duration of a credit freeze;
• Strengthening the fraud alert protection from 90 days to a one year, with a year renewable.
• In ID theft cases, a 7 year fraud alert is created.
• Require any credit reporting agency who charged a fee to freeze credit in response to the data breach to refund those fees,
• Allow for an additional free credit report (consumers already get one under the Fair Credit Reporting Act through annualcreditreport.com)

Freezing credit

The most important feature here is the removal of any fee to freeze your credit. Currently, agencies like Equifax charge nominal fees to freeze credit (anywhere from 3-10) dollars. If this bill passes – not only will that service be free, but it will restrict the way credit agencies use that information while the freeze is active.

The idea behind making this free also keeps credit companies, whom many believe are responsible for the security of credit information, from profiting off information breaches. Given that many financial advisors have advised those impacted to freeze their credit, this would be a benefit to consumers.

It is important to note here that Equifax has suspended the fees to freeze credit for the next month.

A credit freeze restricts access to your credit report. Simply put, it requires the credit agency to contact you first to ensure it was you who applied for credit, thus making it harder for you to apply for credit. You would need to unfreeze your account to apply for new credit. You must also freeze credit with each bureau, which can lead to some expenses as you must pay anytime to lift a freeze.

Remember: a credit freeze doesn’t impact current accounts or your credit score. If you apply for credit often, or open new accounts often, then a credit freeze may not be for you.

Lots of names

The bill has several original co-sponsors, including Senators Sanders, Franken, and Blumenthal. Companies like the National Consumer Law Center, Americans for Financial Reform, CREDO, and the Consumer Federation of America all have also endorsed the bill.

#CreditFreeze

We interrupt this regularly scheduled program

Huge news on the domestic policy front – per a Twitter announcement, President Trump’s two business advisory councils – the Strategic and Policy Forum and the Manufacturing Jobs Initiative – have been disbanded.

The sequence of events has been fast and difficult to follow, but here’s how things went down.

See ya later

On Monday, Kenneth C. Frazier, the CEO of pharmaceutical giant Merck, resigned from the Manufacturing Jobs Initiative in protest at President Trump’s comments on the recent violence in Charlottesville. By the evening of the same day, Brian Krzanich of Intel and Kevin Planck of Under Armour had done the same. They were quickly followed by Thea Lee and Richard Trumka of the AFL-CIO, Scott Paul of the Alliance of American Manufacturing, Denise Morrison of Campbell Soup and Inge Thulin of 3M.

This morning, in response to the sudden exodus, Stephen Schwartzman, chief executive of the Blackstone Group and longtime Trump business and political ally, led a conference call of the remaining council members this morning to debate how to proceed.

By the end, all members had resigned.

In short, President Trump is not disbanding his advisory councils in the sense of (no “The Apprentice” jokes, please) firing their members. The members already quit. The President’s Tweet simply announced that had taken place, and that, as it states he “disbanded” the now-vacant groups, there are presumably no plans in the near future to replace them.

Bold move

This is a surprising move from the President. Historically the role of business advisory councils has been to keep an open communication pipeline between the President and the American business community, something this president has consistently identified as a priority. President Trump has always positioned himself as passionately pro-business, particularly concerned with global competitiveness and the loss of jobs and revenue in American manufacturing.

The Strategic and Policy Forum and the Manufacturing Jobs Initiative were founded specifically to address those issues.

The business community in particular had expected the President to draw heavily on their advice.

On the other hand, that advice has repeatedly conflicted with the President’s other policies. Well before Charlottesville, the Strategic and Policy Forum had seen high-profile resignations: Bob Iger of Disney and Elon Musk of Tesla (who served on, and resigned from, both the SPF and the Manufacturing Jobs Initiative) resigned over the President’s withdrawal from the Paris Climate Accord, and ex-CEO of Uber Travis Kalanick departed over restrictions on immigration from the Middle East.

New directions

President Trump’s elimination of his business advisory councils clearly indicates a new direction in the relationship between the White House and the American business community.

What that direction will be, and what consequences it will have for the economy, remain to be seen.

#ByeByeBusiness