The 1930s ABC Test from California’s AB5 Must Not Be Codified into Federal Law or Regulations
Some lawmakers and regulators believe America was a better place in the 1950s, when many people had traditional jobs at large companies, and when many of those companies were unionized. These lawmakers and regulators say those of us who choose self-employment in modern-day America would be better off if we had old-school bosses and union bosses, as opposed to being our own bosses.
We disagree. Here’s what we told Congress:
These deeply misguided lawmakers and regulators are trying to reclassify us as employees, because as long as we remain classified as independent contractors, federal law makes it illegal for us to be unionized.
Such reclassification means that overnight, it would become illegal for many of us independent contractors to continue earning a living the way we do today — upending the entire idea of what has been a legal way to earn income since the very founding of the United States. Our best-case scenario from this reclassification is that if we have, say, 30 clients of our business today, then overnight, we would have 30 part-time bosses. (Who on earth would want that?) The more likely scenario, as you’ll see below, is that we’ll simply lose our income and careers entirely.
The lawmakers and regulators trying to reclassify us say they want to protect against the misclassification of people who should rightfully be labeled employees. What they’re actually doing is misclassifying legitimate independent contractors like us, in a way that wipes us out of the workforce.
This ABC Test Problem Started in California
In 2019, California passed a law called Assembly Bill 5 that uses a strict version of regulatory language called the ABC Test. This test has been used in some states for many years to determine who is an independent contractor, and who is an employee. The version in California is different. This ABC Test is used in only in one other state, Massachusetts, where until recently, it wasn’t being enforced the way anti-freelancer forces are trying to use it now. Most recently, in Massachusetts in 2022, this ABC Test was used to say that franchise owners are not small business owners, but instead employees of their company’s parent brand.
California’s governor said the stricter ABC Test would “help reduce worker misclassification — workers being wrongly classified as ‘independent contractors’ rather than employees, which erodes basic worker protections like the minimum wage, paid sick days and health insurance benefits.”
As of 2022, that claim has proved patently false. California has seen no reported increase of misclassification prosecutions; no widespread reports of companies reclassifying all their independent contractors as employees; and zero new unions formed as a result of the ABC Test law.
Instead, the primary outcome of the ABC Test law has been the statewide misclassification of legitimate independent contractors. So many self-employed Californians lost income and careers that the state had to pass an emergency measure in 2020, exempting more than 100 professions from the law. A second bill is in the works to exempt even more industries and professions in 2022, because so many legitimate independent contractors are still having problems earning a living. And, voters exempted yet more professions with a ballot initiative by a 59-41% vote.
But that Hasn’t Stopped Federal Lawmakers and Regulators…
The California law was supposed to be the start of a nationwide rollout of ABC Test copycat bills in other states. New Jersey tried, in late 2019 and early 2020, to enact Senate bill 4204. It died in early 2020 after outcry from independent contractors (including us) who flooded statewide newspapers with op-eds, testified before the Legislature, and drowned lawmakers in calls and emails protesting the bill. New York was supposed to go after New Jersey with Senate Bill S6699A, but then-Gov. Andrew Cuomo, seeing all the chaos in California and outcry in New Jersey, said he wanted to punt the issue to a committee for more debate. Then, the Covid-19 pandemic hit, and the committee never materialized. Illinois, too, had some lawmakers suggesting they would put forward a copycat bill around the same time. It never came to pass.
And then, the election of November 2020 led to Democratic control of the White House, U.S. Senate and U.S. House of Representatives. The forces pushing these ABC Test bills in the blue states, and meeting so much resistance from legitimate independent contractors, realized they could just push for a nationwide version instead.
President Biden had campaigned on a pledge to work with Congress to make California’s ABC Test the basis for all labor, employment and tax law. The ABC Test was added to the Protecting the Right to Organize Act, or PRO Act, right at the top of page one. It passed the House but stalled in the Senate, where a handful of Democrats said publicly that they wanted to see the anti-independent contractor language fixed.
With the legislative route blocked, ABC Test proponents turned their attention to the executive branch and possible regulatory workarounds.
The U.S. Labor Department under President Biden rescinded the existing rule for defining an independent contractor for purposes of the Fair Labor Standards Act, and announced plans to replace it. In March 2022, a federal judge ruled that action illegal and reinstated the rule that was in place to protect legitimate freelancers, so in June 2022, the department announced public hearings as part of a process to “engage in rulemaking” about independent contractors. Those hearings were dominated by independent contractors begging the Labor Department to stop attacking their careers. In October 2022, the Labor Department dropped its newly proposed rule, stating that it considered the ABC Test but realized it needs action by Congress or the U.S. Supreme Court to implement it. Instead, the department included elements of the ABC Test in a broader proposed rule that is widely seen as attempting to limit the existence of independent contractors, and that is expected to face legal challenges.
Meanwhile, the National Labor Relations Board, led by President Biden’s newly appointed general counsel, reopened a case with the intent of changing its rule for defining an independent contractor as well. New Jersey’s acting attorney general and Pennsylvania’s attorney general led a group of states in filing an amicus brief to the NLRB, singing the praises of the California ABC Test. We also filed an amicus brief, representing more than 250,000 Americans, urging the NLRB not to implement the anti-freelancer ABC Test.
In the judicial branch as of 2022, lawsuits against the State of California that began back in 2020 had made their way through the court system and up to the U.S. Supreme Court level. Owner-operator truckers asked the justices to hear their case against the California ABC Test law, as did freelance writers and photographers. We filed an amicus brief in the latter case, urging the justices to hear the case because the California ABC Test is now a threat to legitimate independent contractors nationwide. Our amicus brief in that case represented more than 275,000 Americans. So far, the U.S. Supreme Court has failed to stop the attacks on independent contractor careers.
What We, as Independent Contractors, Want
We want the attacks on our chosen livelihoods and smallest of small businesses to stop.
And, we want lawmakers to put legislative guardrails in place to prevent similar attacks on our careers from current or future administrations.
The best way to add these guardrails is for lawmakers to co-sponsor and pass legislation that is based on the test that the Internal Revenue Service has long used to determine independent contractor status. That test can tell the difference between a truly misclassified employee and a legitimate independent contractor. The ABC Test cannot tell the difference between the two.
How to Help Us
You can join us on Facebook or Twitter to see what we’re up to, learn how to raise your voice by writing op-eds and contacting your state and federal lawmakers, and get to know your fellow independent contractors in the fight to save all of our chosen careers.
All of us are new at political advocacy. If you don’t know where to start, then you are in the right place. That’s exactly where we were when these attacks on our careers began in 2019. We’re here to help you understand how to join the fight in ways that work.
We are FIGHT FOR FREELANCERS USA, a nonpartisan, grassroots coalition of independent contractors who oppose the use of the ABC Test in federal law.