Gavin Newsom’s Budget Offers a Glimpse at How a New California Labor Law Will Be Enforced

The proposed budget submitted last week earmarks $20 million for AB 5

Governor Gavin Newsom’s state budget proposal earmarks tens of millions of dollars to enforce a controversial new state law designed to reclassify gig economy workers as employees.

On Friday, Newsom announced plans to budget more than $20 million to enforce provisions of the ambitious law known as Assembly Bill 5, which aims to curb the use of independent contractors in favor of hiring full-time employees. AB 5, co-authored by assembly member Lorena Gonzalez (D-San Diego), mainly seeks to compel tech behemoths like Uber and Lyft to convert their legions of drivers from independent contractors to bona fide employees.

The controversy surrounding the landmark legislation protecting gig workers has continued seething long after it was signed into law.

Newsom’s budget includes an additional $17.5 million for the Department of Industrial Relations to assume an increased workload associated with more workers’ compensation claims, increased “investigations of labor law violations,” related to worker classification, and more wage claim filings and workplace health and safety inspections, according to the proposal submitted to the legislature on Friday.

It also sets aside $3.4 million for the Employment Development Department to train staff and administer the ABC Employment Test that AB 5 requires, and to “conduct hearings and investigations on workers’ status.” The Department of Justice will receive $780,000 to address the increased workload of enforcement actions expected under AB5.

The debate that raged around the bill for months focused mainly on its effects on Big Tech. But by the time the legislation became law last year, its scope broadened to encompass an array of industries, from heavy trucking to journalism. Proponents of the bill say that it forces companies to replace gigs with jobs that entitle employees to state-mandated protections like paid time off, coverage for job injuries, and unemployment insurance. Critics of AB 5 say despite its good intentions the legislation has boomeranged on contractors, making it harder for tens of thousands of them to make a living in a tight economy.

Associations of freelance writers and news photographers sued the state in December to block the law as it applies to those workers. That same month, Uber and Postmates sued California in federal court to block the law. Meanwhile back in September, Uber, Lyft, and DoorDash announced they are backing a reported $90 million state ballot initiative to avoid classifying drivers as employees. Vox Media, publisher of the sports blog network SB Nation as well as Curbed and Eater, is one of several employers who have announced they will be breaking ties with their California freelancers because of the law.

Earlier this month, Uber made changes to its ride-hailing app in response to AB 5.

A Los Angeles Superior Court judge ruled on Thursday that federal law preempts provisions of the state law meant to apply to thousands of independent truck drivers in California.

AB 5 codifies a landmark decision the California Supreme Court issued in 2018 in Dynamex Operations v. Superior Court, which established a strict standard to determine whether a worker should be classified as an employee or independent contractor for certain purposes, presuming all workers are employees unless the employer can demonstrate a worker meets specified conditions, known as the ABC Employment Test.

Apart from freelancers who fear they’ll be negatively impacted, the law’s most vocal opponents continue to be Republican politicians and commentators, including assembly member Kevin Kiley, who is organizing a rally to repeal at the end of the month.

RELATED: Freelance Journalists Sue California Over Controversial Labor Law AB 5

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