The small business strip
Controversial California court ruling is prompting new, conflicting bills at state Capitol
Nine months after the California Supreme Court issued a landmark decision about the future of “the gig economy,” the state’s largest collective of exotic dancers is joining a loud chorus of voices who claim that workers’ freedoms are being trampled.
Even as Big Labor backs what’s known as the Dynamex decision, the Independent Entertainer Coalition is the latest trade group to begin protesting the mandate that reclassifies contract workers across dozens of industries in California. The ruling requires that any person who wants to work for a company as contractor prove they’re free from that organization’s control; that they’re performing work outside that company’s typical business; and that their trade represents work that’s not regularly performed by employees of the company.
When the Dynamex decision came down in April 2018, it was immediately followed by headlines about tattoo shops emptying and salon owners rushing to get lawyers. Sacramento’s Bottle & Barlow barbershop reportedly lost every stylist overnight. Now, some exotic dancers say they’re feeling the pain as club owners are coming under increasing pressure to reclassify them as employees.
“This has been devastating for us dancers in so many ways,” Katie Figueroa, a member of the coalition, said via email this week. “Before, we controlled where, if, when, and how we performed. Now, we have a ’boss’ who can tell us when to disrobe and for whom we dance nude … I find it appalling that in this day and age, I can choose to have an abortion, but I cannot choose how I am paid for making money from my body.”
Brad Shafer, an attorney representing Déjagrave; Vu Services and Nightclubs, says the Dynamex ruling is uprooting dancers from the state. “There are entertainers who have left California and gone as far as New York,” he said.
The Dynamex ruling, however, didn’t happen in a vacuum. Economists and labor force experts have become increasingly concerned that the gig economy—largely fueled by Silicon Valley—is becoming a global race to the bottom. Gig workers have few rights, and many have little stability or retirement prospects. As the titans of tech continue to skirt on investing in employees, many are seeing their profits soar. That, along with Dynamex ruling, is leading to an inevitable clash in the state Capitol.
Lauraine Bifulco, CEO of Vantaggio Human Resources and an expert on employee classification, says it’s completely unclear where this legislative showdown is heading.
“This is an extremely complicated issue,” she said. “There’s nothing black and white about it.”
The future of work
In dozens of U.S. industries, the social contract between employers and employees is changing dramatically.
About 2 million Californians consider themselves as independent contractors. Nationally, about 1 in 14 workers are freelancers.
In 2018, Google—when valued at nearly $800 billion—had more contract workers than employees for the first time in its history, Bloomberg News reported. These contractors have been called Google’s “shadow workforce” because they lack job security and basic benefits. Facebook—valued at more than $500 billion—also uses an army of contractors. From Uber and Lyft to Instacart and GrubHub, tech start-ups are driving a major shift in how Americans think of work. And that’s given Wall Street a reason to seriously rethink the value of employees altogether.
Matt Jepson, a researcher for JobGetter, recently noted what this means. “The pressure is always on gig workers to lower their prices,” he wrote. “Driving down prices means that workers are constantly minimising—not maximising—their earnings.”
The Wild West of independent contracting was suddenly lassoed in the Dynamex case. The court’s decision has its roots in a shake-up at a Los Angeles-based delivery company in 2004. Dynamex Operations West had previously classified its fleet of drivers as employees, but decided to reclassify them as independent contractors, shifting all vehicle expenses, fuel costs and tax paperwork onto them. Two drivers sued and eventually prevailed before the state’s justices.
The California Labor Federation hailed the ruling as a victory. “This will address the common practice in many industries of a company forcing an individual to act as an independent business while the company maintains the right to set rates, direct work and impose discipline,” the federation’s legislative advocate Caitlin Vega wrote in August. “Because [the ruling’s criteria] is clearer and easier to enforce, it will give millions of misclassified workers the chance to become employees. This will mean fewer workers will be forced to rely on the safety net when they are sick, laid off, or hurt at work.”
The California Chamber of Commerce, on the other hand, warned that the decision would devastate businesses. Along with Uber, Lyft and other companies, the chamber is urging state lawmakers to limit the ruling to only the Dynamex workers.
Shannon Liss-Riordan, a labor attorney who’s handling litigation against Uber, Lyft and Postmates, says that as important as the Dynamex ruling is, there’s a reason that the public has not seen a change in how Big Tech operates.
“So far, the companies have really been able to limit the impact by using clauses to force workers into arbitration,” Liss-Riordan said. “That’s how the companies have been able to head off any real change. There’s just a lot of power they have to avoid these arguments being fleshed out in court. As a practical matter, it will take a long time to sort out.”
Giants of noncompliance
Cash-rich corporations may be temporarily warding off the Dynamex effect, but many smaller businesses in Sacramento aren’t. Bifulco, who has been advising companies on employee classification for years, says while some corporations that built contract workers into their core business model are still trying to ignore the ruling, other businesses are trying to comply.
“We’ve had a flurry of clients saying that this is what it took to convince them to change their practices,” Bifulco told SN&R. “They’ve made the decision that the risk is just too great now.”
That risk was recently brought home for Déjagrave; Vu Services and Nightclubs when several dancers sued in San Diego County Superior Court. The dancers allege they were misclassified as contract workers and are pressing for back wages.
But in the course of representing Déjagrave; Vu Services, Shafer says he believes it’s “a handful” of dancers trying to get financial settlements at the cost of destroying the autonomy most of their peers cherish.
“A lot of the entertainers don’t want to be employees,” Shafer said, since they already made healthy tips and a percentage of a club’s dance fees before the ruling.
Figueroa of the dancers’ coalition agrees. “[Now] we have a set schedule, a biweekly paycheck and limitations on when and how often we can work,” she said. “We have lost all freedoms, tax deductions and benefits of being a dancer.”
The coalition is hoping to bring Stormy Daniels, the political iconoclast and adult entertainment star, to the state Capitol in February to publicize its protest of the Dynamex ruling. Daniels had agreed to stand with the dancers, but had to reschedule at the last minute.
In December, Assemblywoman Melissa Melendez, a Republican from Riverside County, introduced Assembly Bill 71, which would thwart the Dynamex ruling by establishing more flexible criteria for contract work. Assemblywoman Lorena Gonzalez, a Democrat from San Diego, has introduced AB 5, which would enshrine the decision into unambiguous state law.
Yet while it’s early in the legislative session, no bills have been introduced that would protect small businesses from the impacts of Dynamex while holding major corporations accountable for exploiting workers through misclassification. That type of protection was built into Proposition C, the San Francisco ballot measure approved in November to raise $300 million a year to help the homeless through a 0.5 percent tax increase that only applies to businesses with more than $50 million in annual revenues.
Labor attorneys say such “carve-outs” will only work in the gig economy, however, if there’s a way to prevent large corporations from gaming the rules by setting up smaller, intermediate shell businesses.
Battles around labor independence are playing out on the national front, too. An element of the Workplace Democracy Act that U.S. Senator Bernie Sanders introduced in May 2018 would essentially make federal law for contract workers follow the Dynamex ruling.
For labor experts, there are too many legal developments happening to know where the chips will fall. “There’s just a lot to be watching right now,” Bifulco said. “But if we continue in this direction, it really could be the death of all freelance work.”