Coronavirus and AB 5: The perfect storm

When California legislators enacted Assembly Bill 5, few were likely thinking about a global pandemic that could shut down the economy. We're now in the midst of that very crisis, and it's as if someone was looking into a crystal ball.

We're standing at the exact intersection of the gig economy and the employment welfare state. We've jackknifed from company town to go-it-alone, and thousands of workers are being dropped straight through the social and economic safety net. Companies like Uber, Lyft and DoorDash, whose valuations reflect a fictional narrative that their drivers and couriers are truly independent, are suddenly doing a contortionist act, trying to extend quasi-sick-leave benefits to "non-employees" who test positive or are quarantined because of COVID-19.

It shouldn't work that way. Either workers are employees entitled to sick-leave, unemployment and other benefits of employment, or they're on their own as independent contractors. There really is no legal middle ground. Employees asked to say home without pay can apply for unemployment benefits through the Employment Development Department for this unpaid period. Gig workers who are victims of the decline in demand for ride-sharing are not even eligible for EDD benefits. Gig workers who have not paid into EDD are left with zero safety net as they face the prospect of a community-wide shutdown. As business dries up, they will have no entitlement to unemployment benefits, even if they've paid into the system during prior periods of employment. Hundreds of thousands of workers will not be able to pay rent or cover their health care expenses as they sit idly waiting for passengers who have nowhere to go.

The optics for the gig companies couldn't be worse. Sick workers without income, health insurance, or unemployment benefits could be that eye-opening "aha" moment for the AB 5 opposition. These companies have collectively raised more than $110 million for a state ballot initiative in November that would exempt them from the statute. In exchange for maintaining an independent workforce, they've promised to provide health-care subsidies for drivers who work 15 hours or more a week.

As COVID-19 shuts down the world as we know it, the gig economy comes into sharp and scary relief. Uber and Lyft drivers make the most money off of events demanding large crowds that have now been cancelled: NBA games, NCAA March Madness, MLB spring training, conventions, concerts. After Gov. Gavin Newsom called for the cancellation of gatherings of more than 250 people, the Centers for Disease Contrik and Prevention lowered its guidance to gatherings of 50 or more. The President just recommended limiting gatherings to less than 10 people.

Uber, Lyft, and Instacart have announced plans to provide some compensation -- up to 14 days of paid sick leave -- for workers diagnosed or quarantined as a result of the virus. Postmates is creating a fund to assist delivery workers with health care costs related to the coronavirus. That these companies are offering paid time off, even as they argue their workers are not employees, shows they can't ignore the importance of workplace benefits. They're standing at a precipice: If they go too far, do they blow their case that the workers aren't employees? Do they risk making the benefits permanent?

Without income or other benefits, drivers will keep driving and couriers will keep delivering, exposing both the public and themselves to the virus. When customers contract the virus from drivers and delivery people who can't afford to take time off even though symptomatic, the true cost of the AB 5 backlash comes into focus.

Rideshare Drivers United (RDU), an independent association of rideshare drivers based in Los Angeles, is petitioning for immediate relief, through the implementation of AB 5. Drivers' income, according to RDU, has dropped by 80% and "most of us are vulnerable to homelessness and unable to meet the most basic needs for ourselves and our families." Unlike workers in other industries, the association says, rideshare workers have been left out in the cold. "Although we are clearly employees under AB5, Uber and Lyft maintain that we have no access to employee paid sick leave, to disability protections, and to unemployment insurance."

Among key demands laid out in its petition, RDU calls for Uber and Lyft to do the following:

• Immediately withdraw the ballot initiative to create a gig worker carveout to AB5. Such a referendum is a danger to drivers and the public.

• Reallocate the $110 million dollars for the AB5 referendum to create an emergency driver relief fund.

• Cease all appeals for driver unemployment insurance claims.

• Follow all California employment laws now.

• Quickly process and pay wages of workers who have filed with the labor commissioner.

"These are not optional demands; the lives of hundreds of thousands of California families are at risk. Every day that action is not taken means more and more drivers face starvation, homelessness, and other deprivations of human rights."

Had companies reclassified workers when Dynamex was decided, or had they made the transition early this year, the picture would have been far different. Workers furloughed or sidelined by the economic downturn, who had paid into the system, would have been eligible for unemployment insurance benefits. They would have been required to look for work as a condition of receiving those benefits, but the safety net would have been unfurled for them.

It's possible that the administrative justice system -- the EDD -- could yet make a determination that many of these workers were misclassified and are entitled not only to unemployment but also back pay and other benefits. It's even possible that the IRS could allow contractors to be refiled as W2s, but I wouldn't hold my breath. There's too much in play right now.

What is certain is that the gig workforce will ultimately shrink, and we may start to get a true reckoning of the nation's unemployment numbers. Because those numbers are drawn from unemployment insurance claims, they fail to reflect an entire sector of the workforce that will now be under- or unemployed. If we were to factor this other workforce into the unemployment numbers, the percentage of unemployed would go up appreciably.

It's hard to predict the future of the coronavirus pandemic, but its repercussions on a large segment of the state's workforce will be long-lasting and indelible. When California voters go to the polls in November -- assuming polls will be open by then -- will they really be able to forget? Will they disregard news stories about Uber drivers who've lost their homes or GrubHub drivers applying for food stamps? Short of a miraculous coronavirus cure, we can assume that these stories will become the constant background wallpaper of our lives over the next several months.

Now is the perfect time for gig workers to educate California voters about the true economics of AB 5: Without it, taxpayers foot the entire bill for workers displaced by the coronavirus and future pandemics; with it, customers could pay an additional dollar for each ride. It should be a no-brainer. 