As California deals with the coronavirus pandemic, the services of medical professionals are needed throughout the state. Even in normal times many healthcare facilities utilize the services of "locum tenens" practitioners (a/k/a temporary staff) to deal with fluctuations in demand. With the public health landscape changing day by day, affording our healthcare facilities that flexibility can save lives.
Physicians and some other medical professionals are exempted from AB5, but due to the illogical nature of the exemptions some of the most critical professions are NOT exempt; for example, respiratory therapists, physician assistants, and nurse practitioners. That means if an overburdened hospital needs to quickly bring on more respiratory therapists, they cannot do so without hiring the therapists as employees and going through all of the bureaucracy and extra cost that entails.
In addition, translators are desperately needed to ensure that a scared and anxious public can receive the vital information they need in a language they understand. County public health departments don't keep translators for hundreds of languages on staff; they rely on contracting. But that's not happening right now.
In California and throughout the country politicians are quick to call for stimulus checks to be sent to people who are now unexpectedly unable to work due to quarantines and shutdowns. Thousands of Californians experienced the same thing on January 1, 2020, thanks to our elected officials - and there is no rush at all to help affected independent contractor professionals.
Instead, during a time of global crisis Lorena Gonzalez wants to ensure that California's IC's who could still possibly work (many IC's work from home) are legally prohibited from doing so - without compensation. She wants EDD enforcement actions visible and proactive, an effort that takes the attention of EDD agents away from processing the flood of new unemployment claims. She has clearly lost her mind. It doesn't matter if people die or if unemployed Californians have to wait longer for benefits; she wants AB5 enforced!
It's no surprise that there's a growing chorus of voices demanding that Governor Newsom sign an executive order to at least suspend enforcement of AB5 until 2021, or to repeal it entirely. The Assembly has recessed until mid-April so Newsom is our only hope.
The editorial board of the Orange County Register called on Newsom to suspend AB5 until 2021 in an editorial published March 18:
"The state should suspend any law that makes it even more difficult for Californians to pay their bills during this difficult time.
"Empty grocery store shelves remind us of the important role of delivery drivers. We desperately need more drivers who can get goods to stores and deliver products to people’s homes. In fact, it’s far safer to have food and household goods delivered directly to people’s doors rather than have people waiting in store lines where the virus can easily be spread."
From an op-ed at RedState:
Suspending AB5 would free up independent healthcare contractors to assist their fellow Californians with their medical needs at a critical time in the spread of the virus, which would give healthcare workers in doctors offices and hospitals more time to devote to life-saving in-house care needs.
Beyond that, because so many Californians will either have their hours scaled back as a result of all the places that have basically had to be shut down (restaurants, bars, and the like), many people will be seeking ways they can work from home, perhaps in a freelance capacity, because of the “social distance” rules that are now in effect. Suspending AB5 will allow them the freedom to pursue those opportunities knowing that their income has the potential to be unlimited as long as AB5 is not in effect.
ACTION ITEM: Call, email, and write Governor Newsom and ask him to sign an executive order suspending enforcement of AB5 until 2021.
AB5: Hellish Audits, Six-Figure Penalties, Small Businesses Ruined And A Dangerous Political Weapon—Now In the Hands of the Powerful.
by Kirsten Mortenson
Small businesses, independent contractors, and freelancers have been crying out for months about the horrendous fallout from Assembly Bill 5, California’s so-called “anti-gig” legislation that went into effect on January 1, 2020.
The situation is far worse than many of us even imagined.
A new presentation by Los Angeles attorney Deann Chase, available on YouTube, describes the consequences facing California businesses that run afoul of AB5: hellish audits and staggering fines.
Chase, whose practice focuses on helping small businesses negotiate issues such as incorporating, forming partnerships, establishing trademarks, and contracts, begins the presentation by reviewing the history of AB5, including the “ABC test” established by the April 2018 California Supreme court Dynamex case and the Borello test that preceded Dynamex (and was, Chase notes, more flexible, forgiving, and business-friendly).
However, Chase says, the “very convoluted and not well-drafted” AB5 codified and extended Dynamex. California businesses must now show that they’ve satisfied a bewildering laundry list of conditions to prove contractors they’ve hired are not “misclassified.”
Then, around 40 minutes into the presentation, Chase begins describing the penalties businesses face if they’re found to be out of compliance with the AB5 statute.
Kiss Your Small Business Good-Bye
At the state level, businesses found in violation of AB5 face the risk of enormous financial penalties, including:
They may be subject to additional federal penalties and fines.
It gets worse. Businesses may be assessed these penalties for “violations” that precede AB5.
Hard to believe, but it’s true: because fines for misclassification were established by prior legislation (SB549, signed by then-Governor Brown in 2012) businesses could, in theory, be punished for “violations” going back for years.
Own a small business in California? If you’re audited by the California Employment Development Department (EDD) they may hit you with fines for “violations” that you “committed” years ago—long before AB5 went into effect.
Big Brother EDD Is Watching!
And there’s more.
Under AB5, you also need to report to the EDD every time you hire a contractor, if you pay that contractor more than $600.
You have 20 days to file that report. Miss the deadline? “Next thing you know,” Chase says, “you have an EDD tax audit.” In other words: more fines.
These Audits Are Happening Now
None of this is merely theoretical.
This is not something that might happen, someday in the future.
It’s happening now. Today. Small companies—the one- and two-person businesses that are the lifeblood of our economy—are being audited and slapped with six-figure penalties.
Declaring bankruptcy won’t help them, because these are “back taxes.” Business owners who can’t pay their fines will be slapped with liens on their homes. They’ll end up homeless.
Backers of the brutal AB5 claim that the bill’s intent is to protect workers.
Maybe it is, maybe it isn’t. But what is stunningly obvious is that this law will quickly decimate California’s small businesses. It will shred our state’s economy.
Worst Of All, AB5 Can Be Used As A Political Weapon
Another key point Chase makes in her presentation is that, chillingly, in cities of over 750,000 residents, the law also empowers city attorneys to impose injunctions against businesses, effectively shutting them down.
This shocking language means that AB5 equips powerful interests in our state to target political opponents. Consider this scenario: a media outlet speaks out against a special-interest politician. What’s to stop the politician from accusing the media outlet of employee misclassification and requesting an injunction to shut it down?
Dare to challenge someone who is politically connected? Don’t be surprised if you get a call shortly after from the EDD.
It is chilling. It is outrageous.
We need to wake up.
We need to Repeal AB5 before it’s too late.
Lorena Gonzalez (D-80) hosted a pro-Warren campaign event in San Diego on Saturday night. The main event was an appearance by former presidential candidate Julian Castro, but the elephant in the room was AB5.
Anti-AB5 activists weren't about to let the occasion pass by without making their presence known and their voices heard. A determined group of freelancers and artists showed up with signs and waited for the disgraced assemblywoman to take the stage. When she did, they let loose, holding signs and chanting "Repeal AB5!" loudly. Those in attendance said the commotion clearly affected Gonzalez as she realized what was happening. However, instead of pausing, recognizing the protesters or otherwise working to calm the situation, Gonzalez fell into a now all-too familiar pattern...she got vulgar.
With children and families present, the San Diego representative began a chant of her own..."F**k Trump!" Perhaps it was all she could think to say or perhaps she thought she could rally her supporters with some "red meat" and drown out the protesters asking to be freed from her horrendous legislation. Whatever the case may be, the chants for repeal got louder. Here's how Alitzah Wiener-Dallas described it in the public Facebook group "Freelancers Against AB5":
You can follow this link to see the live streaming video one kind protester provided.
Gonzalez' response is indicative of how she views her constituents - as serfs and pawns. A true politician would have at the very least waited for the crowd to grow quiet or responded with some diplomatic (if not disingenuous) platitudes. The assemblywoman is so entrenched in her personal point of view and so beholden to her powerful donors that she felt no shame at all getting completely vulgar at a family event meant to highlight a woman who is running to be the first female president of the United States. Not exactly a ringing endorsement.
*Head to ab5facts.com for voter guides, press and media and other resources. The bill to repeal AB5 (AB1928) will be heard this coming Thursday - that is, if the committee chair allows it to be heard on the floor at all. Call your reps and ask that they hear and pass AB1928 and join the Facebook groupFreelancers Against AB5 for more stories and information.
Tuesday, February 18 (tonight!) there will be a "Repeal AB5" concert at Whiskey A Go-Go beginning at 8 p.m. There will be a free concert and professionals available to help answer questions about AB5. If you're in the area of the famous West Hollywood venue, pop in and lend your support (and voice) to the fight to save California's arts and freelancing industries from this horrific new law.
And special thanks to actor and comedian Hal Sparks for standing up and shouting out. We need more voices like his in this fight.
*follow our Twitter account @ab5of to keep up on all the stories and events surrounding AB5
by Sara Kustiner Pedri (originally posted to Freelancers Against AB5 Facebook group)
AN OPEN LETTER TO DEMOCRATS IN THE CALIFORNIA STATE ASSEMBLY, SENATE AND GOVERNOR'S MANSION: WHAT WERE YOU THINKING?
Congratulations, California Democrats! You’ve successfully scared the holy bejeezus out of all California companies. Now, let’s talk.
In Marvel Universe terms, you’re Tony Stark. You tried to do something to protect everyone, but you created Ultron. Now, it’s time for a Vision.
It’s been 6 weeks since AB5 was signed and put into effect. We’ve now had 6 weeks to see some actual results. So, as a CPA with clients in the Independent Contractor world, and as a lifelong Democrat whose Assemblyperson and Governor actually voted for this shitshow that is AB5, I need to ask: What were you thinking?
After reading the actual law, listening to interviews, and taking numerous courses on AB5, I simply don’t know what the thought process was behind AB5. What was the goal? Because, if it was to “protect California workers”, you’ve done an abysmal job of that.
And if the ultimate nefarious goal was to have everyone join a union, then I have to ask: who was the genius who 1) didn’t consider that the result of AB5 would include dog walkers needing a union, and 2) then thought, “Hey, we need to make an exemption for dog walkers now!” Seriously. There is a line item in a California Labor Law that specifically states “dog walkers”? Ok, which one of you legislators has dogs that need walking? Because that’s like Internal Revenue Code laws that take effect on some arbitrary date like May 23, 1976, because some politician or lobbyist somewhere did something on May 22.
For the most part, the laws were already on the books before AB5.
a) Some companies were misclassifying workers. True. But the Borello Test was on the books. Catch them; don’t punish everyone for their misdeeds. You’ve increased the EDD funding budget for audits now – you could have done that before.
b) California has had a law for years that states that companies must cover independent contractors with Workers’ Comp Insurance. Sorry, Senator Warren – I love you, but you’ve got that one wrong. It’s right there on the back of my State Comp Insurance Fund report. Of course, these W/C insurance companies may not have been paying out CLAIMS to independent contractors, but you realize that you should be going after the W/C insurance companies who took premiums but didn’t pay out, right?
c) If you think these workers will now be covered by health insurance, you’re nuts. These ICs can work 50-100 different gigs in a good year. Did you really think they were going to change their health insurance coverage every time they picked up a new gig? I’ve got news for you. Switching health insurance when going from one long-term employment job to another long-term employment job is hard enough – COBRA, anyone? Employer-provided health insurance is NOT going to happen under AB5. Period. End of discussion.
d) Minimum wage protection? You must be joking. Some of the professionals caught up in this make $300-1,500 a day.
The laws were there. You just needed to enforce them. Instead, you took a single legal case, Dynamex (where one single company decided to break the rules and throw all their employees to IC status), and you brought the hammer down. On everyone. You have decided to ruin the livelihoods of 1-2 million true California independent contractors because someone somewhere screwed up on, what, 1,000 classifications? That’s some serious overreaction and, might I add, a rather large amount of California citizens to consider acceptable collateral damage.
Let’s now talk about the known, proven effects so far. And, yes, they significantly disagree with Assemblywoman Lorena Gonzalez’s reporting.
I myself, being naïve, was anticipating that my clients would now be receiving W-2s instead of 1099s, which is a huge problem in itself. AB5 has caused so much fear that hiring companies are now refusing to accept a W-9 with the legal name and tax ID of a legitimate LLC / partnership / S-corp / C-corp and are forcing these freelancers to provide a W-4 and go on payroll, even though they fulfill the exemption of Business-to-Business Contractors and the Borello test.
You see, hiring companies aren’t going to the trouble of figuring out who is who. Everyone has become an employee – even legitimate businesses. These freelancers have operated as true businesses for years with business licenses, workers’ comp insurance for their own subcontractors (if any) as required by law, filing of 1096 and 1099s and DE-542s, paying unsecured business property taxes, etc. They also make large tax-deductible investments in their own equipment, tools, and work spaces.
Forced to be employees, they now will receive W-2 income rather than Form 1099 income, and they will have no ability to deduct their business expenses related to any W-2 income. If they are Schedule C single-member disregarded entities, the Tax Cuts and Jobs Act of 2017 removed their ability to deduct unreimbursed employee business expenses on Schedule A. As such, their Schedule Cs will begin to run net losses, winding up with seeming Hobby Losses which are disallowed by the IRS and FTB. I can assure you these aren’t hobbies; they are livelihoods. If they are partnerships or S-corps, there will no longer be any Form 1065 or 1120S income, but their tax returns will continue to deduct business expenses, creating ongoing losses. Do you know how many years a Form 1065 or 1120S can issue K-1s with ordinary businesses losses before the IRS starts asking questions? Asking for a friend.
By the way, with these losses you’ve created, you’ve just removed the TCJA Federal income tax benefit of the Qualified Business Income Deduction, because without net business income, there’s no deduction.
In other words, AB5 will put these professionals out of business and they will close their LLCs, partnerships, and corporations. And it won’t be because of the expense of payroll taxes. It will be because they can no longer operate the businesses they previously legally established due to not receiving payment/income in the form necessary for proper tax reporting purposes.
It has turned their income tax and business worlds upside down. But I was naïve. AB5 has resulted in far worse than that.
Instead of switching ICs to employees, many hiring companies have simply cancelled contracts. Period. Done. Work gone. Needless to say, that sound you heard was 1 million independent contractors finding out they no longer have a source of income.
And who’s getting these jobs? OUT-OF-STATE employees, because, lo and behold, your little AB5 states that California companies who hire out-of-state ICs aren’t affected by AB5.
So, you’ve successfully 1) forced ICs to move out of state for work, and 2) allowed CA companies to hire out-of-state workers. Brilliant! You just took an entire demographic of mostly Democratic voters and MOVED them out of California! Tell me, who exactly are your political advisors? Because I want to make sure I do NOT hire them.
And, lastly, as a CPA, you’ve tied my hands. I can’t even assist my clients in attempting to make a proper determination, because I am “jointly and severally” liable for any penalties ($5,000-$15,000 fine PER individual misclassification). Only a member of the bar can advise a business owner about classifying workers as employees or ICs. Guess what? Attorneys are booked up three months out. I guess that benefits you the most, as it’s difficult to find an available attorney to write up a class-action lawsuit against you.
In summary, let me say that I hate… HATE… giving the GOP any talking points. But, California Democrats, you have brought this on yourselves. Now, fix it!
by Jessica Tucker
To my new and unexpected friends:
As a person who has been in the AB5 fight for quite awhile, I would like to share something with you. For months, as I’ve read through stories and commentary of those affected by AB5, I noticed more and more despair, sadness, and hopelessness. As our incomes were lost, our bills came due, and businesses began to be fined retroactively for this egregious law, the sense of defeat has piled up. As lawmakers stonewalled us, the media froze us out, and we were told there would be no relief, our panic set in. But, friends, I would like to present you some hope.
I have never once doubted that we will win this fight. I have never despaired or lost hope. I have never felt defeated. In fact, I feel that we’ve already won. Let me tell you why.
As more and more evidence has come to light, we have clearly exposed the people and intentions behind AB5. This is not a partisan issue, and it’s not even an issue that has two equally valid sides for or against the law. There is one side that is fair and just, and one side only. There is one side with truth. We stand on the right side of justice. We have the foundation of Truth, and nothing can stand against the truth.
Many have compared this fight to David and Goliath. We all know who won that fight. Why did David win? Though he was smaller and "weaker", he was smart, determined, and stood on the foundation of goodness. Evil never triumphs over Good. Evil may rule for awhile, but it has never been ultimately victorious even once in human history. Because we stand on the side of Good, we have already won.
The fight will be hard and may be long. Many of us will suffer a great deal under this oppression. But we must continue to fight. Bad guys only win when the good guys give up. The only way for evil to be victorious is for the good to stop fighting. If the good stay and fight, the good will always win.
This law may be a blessing in disguise. How long has this corruption gone on? How much further do they intend to take it? They have hit us with AB5 at the perfect moment...for us. Why? We have a rare opportunity here to clean out corruption and start fresh. These lawmakers exposed themselves right before an election. Anyone supporting this law wears a badge of corruption. It is an easy way for us to tell who is working against our interests. We can take this opportunity to clean out our government. Never has it been easier to spot the rats and clear them out. This single issue has exposed corruption even up to the national level. How easy it is to spot these people now! If not for AB5, they would have ruled for many more years!
We have two paths to victory. Either we get an immediate repeal and then vote them all out, or we vote them all out and then get a repeal. The only path to defeat is if we give up.
There are nearly 40 million people in California. An estimated ⅓ of those do some type of independent contracting work. That is over 10 million people affected by AB5. This movement against AB5 that we’re a part of right now...this is only the beginning. We are the first group in a chorus of voices that will rise up against this oppression in the coming weeks. We are not alone. We are the front lines, and there are millions behind us.
We are a free people. Our public servants have no ultimate power over us. They have a false sense of control over our lives. This is their fatal flaw. We elected them to a human institution to govern with human laws. But our freedom doesn’t come from human institutions. We are born free from the control of others. We do not have to submit to their false sense of control. This right to personal freedom was not given to us; we were born with this right.
Take heart. Be brave. If we continue to fight, then we have already won. Stand on your Truth, unwavering, dignified, sure and confident. Do not beg and plead, speak with desperation, show sadness, or feel frustration. You are on a solid foundation of Truth, with countless people standing with you. That is all you need to win.
Your Brother/Sister in Freedom
PRESS RELEASE : ACTION ALERT
Coalition Against AB5 (CAAB)
Contact: Kira Davis firstname.lastname@example.org
Twitter: @RealKiraDavis @Ab5of
February 12, 2020
Assemblyman Kevin Kiley (CA-6) has sponsored an assembly bill that will fully repeal the horrific AB5 and restore the rights of independent contractors to work freely. AB1928 faces many challenges as it weaves its way through the capitol, not the least is which the hesitancy of many entrenched representatives to go against the “status quo” of Sacramento politics. However, Kiley has indicated that he’s secured a commitment to have AB1928 out of “rules this Friday and referred to a policy committee”.
In a statement to our Coalition Against AB5, Kiley urged voters and constituents to continue to call and email their representatives and ask them to co-sponsor AB1928.
“Thanks to thousands of Californians making their voices heard, momentum is building to repeal AB 5 and restore the Right to Earn a Living. It is vital that we keep up the pressure. Please stay in frequent contact with your Assemblymember and Senator, urging them to co-author AB 1928 and support its passage.”
AB1928 is a bill that can be signed and enacted as soon as it reaches Governor Newsom’s desk. It does not require independent contractors to continue waiting as their income dries up and they are faced with leaving the state. This bill would mean immediate relief.
While we at CAAB understand that full repeal is a tall order given the current climate inside the halls of our state capitol, we also recognize that nothing short of a full repeal will be justice. All Californians deserve justice, not the chosen few who receive special carve-outs…carve-outs which will only leave them at the mercy of the state moving forward.
We are asking all concerned parties to immediately call or email your representative, tell them you need immediate relief from AB5 and ask them to kindly co-sponsor AB1928 and expedite it’s passage.
Your voices and your votes are the most powerful weapons you have. Now is the time to exercise those weapons without abandon. Our very livelihoods depend on it.
Click here to find your representative http://findyourrep.legislature.ca.gov/
Navigate to AB5facts.com for more action items, information and resources.
Follow @AB5of on Twitter.
*.pdf version of press release available here
We're a loose coalition of freelancers and independent contractors trying to centralize information about AB5 and empower ICs across the state to fight for their livelihoods. We tell stories and make plans.
For press and inquiries contact Kira Davis email@example.com