Biden Takes a Destructive California Idea National

The state’s laboratory of policy chaos has produced another misbegotten experiment for progressives to replicate elsewhere.

Gavin Newsom doesn’t need to run for president in order to shape national policy. The Biden administration has made clear it’ll follow California off a cliff, taking Newsom’s campaign against independent contractors national with a March 2024 Department of Labor rule change.

“Misclassifying employees as independent contractors is a serious issue that deprives workers of basic rights and protections,” acting federal labor secretary Julie Su declared in her department’s January 9 announcement. “This rule will help protect workers, especially those facing the greatest risk of exploitation, by making sure they are classified properly and that they receive the wages they’ve earned.”

That’s pretty much what Su had said in 2019. Back then, she was Governor Newsom’s secretary of labor. In signing Assembly Bill 5 (A.B. 5), her boss said he was ending the scourge of “employee misclassification” — the practice, Newsom said, by which rapacious companies hire as freelancers men and women who should be called “employees” and who should therefore benefit from the entire Domesday Book of California and federal employment regulations.

But more important, A.B. 5 crushed tens of thousands of California business owners — those who operate as independent contractors as well as those who employ or otherwise rely on them. Now Biden and Su plan to bring the crazy to every American state.

“The chilling effect alone will put many independent contractors out of work,” predicts Karen Anderson, a writer, editor, photographer, and creator of the Facebook group Freelancers Against AB5. She points out that the new federal rule is a “a mind-boggling 339 pages,” so complex that even freelancers exempted from California’s byzantine A.B. 5 will find themselves jettisoned by employers who don’t want the compliance hassles associated with the sprawling federal rule.

“As usual with government overreach, it’s the little guy who gets hurt, like the one-person business or the mom and pop who are not allowed to contract with a fellow independent professional, or who get audited by the Employment Development Department or the Division of Labor Standards Enforcement for alleged misclassification violations that result in astronomical fines and penalties,” says Anderson.

When he signed A.B. 5, Newsom said the new law would stop companies from “wrongly classifying” workers as “independent contractors rather than employees,” a “misclassification” that “erodes basic worker protections like the minimum wage, paid sick days and health insurance benefits.” But then he roared when he probably ought to have said nothing: “Assembly Bill 5 is an important step, . . . a next step is [sic] creating pathways for more workers to form a union, collectively bargain to earn more, and have a stronger voice at work — all while preserving flexibility and innovation.”

Originally aimed at the Silicon Valley gig economy — at independent drivers that provide the backbone for such businesses as Uber, Lyft, and DoorDash — A.B. 5 was always about enhancing union power. Its author, Lorena Gonzalez, was a San Diego–area Teamsters official when she entered the state assembly in 2013. Upon Newsom’s signing of her bill, she was delighted by the prospect of thousands of gig drivers herded into corporate employment where they would be more easily targeted for unionization. She declared that California, “one of the strongest economies in the world, . . . is now setting the global standard for worker protections for other states and countries to follow.”

What happened next? Uber, Lyft, and DoorDash spent $200 million on a successful 2020 state ballot initiative to exempt themselves from the law. When the smoke cleared, the only businesses laboring under the burden of A.B. 5 were those too small to fight back.

Anderson says it’s a certainty that the new federal regulation will do for all Americans what Newsom’s law did for Californians. She points to her list of 600 California business types thrown into chaos by A.B. 5. It’s a heartbreaking catalogue of men and women — including speech pathologists, teachers of English as a second language, SAT proctors, translators, writers, and actors — whose own government destroyed their piece of the American dream.

Lili Von Shtupp (please let this be her real name and not merely a movie reference) told Anderson, “I am a 54-year-old disabled female burlesque dancer, emcee, magician, and producer. With eight minutes work as a dancer onstage, it’s impossible to characterize me as an employee. I work for some companies once a year.” Speaking directly to the state’s union-backed politicians, Von Shtupp said, “AB 5 has devastated my coming back to work after being diagnosed with a degenerative illness. I can’t be hired at a 40-hour-a-week job as I cannot have the flexibility to deal with my illness or receive an hourly pay rate to survive part time. I also can’t drive. I am the textbook small-business entrepreneur. AB 5 has effectively made it impossible for me to work and support myself with dignity.”

“I ran L.A.’s No. 1 weekly burlesque show for twelve years. Now I sit home writing my elected representatives begging for the right to work, ” Von Shtupp added.

A.B. 5 author Lorena Gonzalez has since left the state assembly to become president of the Teamsters-affiliated California Labor Federation. From that lofty promontory, she crowed that Su’s rule change will dispatch regulators to “prevent [California businesses] from shopping around to a different state with laxer rules.”

One of those former Californians is trucker Tom Odom.

Odom was born and raised in California, where he grew his trucking business. But Newsom drove a stake through Odom’s business by signing A.B. 5, prohibiting him from working in the state. When I caught up with him to discuss the big news out of the U.S. Department of Labor, he was laboring — picking up cargo in Deming, N.M., a remote crossroads town famous for the Silver Spike, the commemorative hardware driven into the spot where the Southern Pacific railroad met the Atchison, Topeka and Santa Fe in the New Mexico Territory in 1881.

Odom left California last year, joining more than a million Californians abandoning the state in a mass migration so historic that it has become known as the “California exodus.” He moved his business to Tennessee, but he and Mrs. Odom think they’ll ultimately settle in Texas. They’re hampered for the moment because they’ve struggled to sell their place in the Central Valley town of Madera.

The pending federal rule change would have him cornered again.

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There’s still hope that the federal rule change will die an ignominious death. Kevin Kiley, a California Republican who opposed A.B. 5 while in the state assembly, has raised the alarm since he joined Congress in 2023. Though a freshman, he’s already chairman of the House Workforce Protections Subcommittee, and in that capacity has endlessly blasted both the proposed change in labor law and Julie Su, the force behind the new rule.

Kiley knows Su too well. “The highest position at DOL continues to be held by an official who does not have enough support to be confirmed to lead the agency on a permanent basis,” Kiley and House Education and the Workforce Committee chairwoman Virginia Foxx (R., N.C.) wrote just before Su’s formal announcement of the rule change.

“Many of the objections to Ms. Su’s nomination come from her . . . allowing fraudsters to steal $32 billion in unemployment insurance from California taxpayers,” the lawmakers noted. “Ms. Su was also the chief enforcer of AB 5, a California law that mirrors current federal anti-worker proposals like H.R. 20, the [PRO Act], and DOL’s proposed independent contractor rule. AB 5 denied workers the freedom to earn a living as they choose, costing thousands of workers their jobs.”

Kiley says he’ll block — or at least slow — the implementation of the rule with a Congressional Review Act (CRA) resolution in the House; Bill Cassidy (R., La.) announced he’ll do the same in the Senate. A CRA resolution would require volumes of paperwork from the agency and a congressional hearing before the rule can take effect. Even if it passes both chambers, however, it’s a near certainty that Biden would veto the resolution.

Representing freelancers all over the U.S., the Sacramento-based Pacific Legal Foundation is suing to block enforcement. “The Biden administration has upended the straightforward [employment] rule and replaced it with an interpretation so vague and uncertain that only the DOL itself can tell if an independent contracting relationship exists. It has made this change with a wholly inadequate justification, leaving millions of contractors twisting in the wind.”

In a separate lawsuit, the Financial Services Institute, the Associated Builders and Contractors, the Associated Builders and Contractors of Southeast Texas, and the Coalition for Workforce Innovation say the new rule would be so complex as to make it close to impossible to classify any business as an independent contractor.

There’s even rearguard action inside the California assembly. There, in the place where the madness broke out, first-term assemblywoman Kate Sanchez (R.) announced this week that she’s introducing a bill to repeal A.B. 5.

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His trucking business effectively banned in California, Tom Odom takes some comfort from the news that the resistance is gathering strength. Complying with A.B. 5 cost him “thousands of dollars”; the proposed federal regulation will likely cost him thousands more — if he can figure out its implications.

But Odom worries for the rising generation. “It’s not about me anymore,” he says. “I’ve got one or two years left, maybe just two or three” before retirement. He could “avoid a lot of headaches” by hitting the eject button now and retiring. But he supports legal cases and indulges calls from the occasional reporter “for the younger guys who want to do what I did.”

What he did would be remarkable in most other parts of the world. Odom was raised in East Los Angeles, then as now a tough neighborhood. “We were so poor that I recall my parents were occasionally on welfare,” he says. He dropped out of high school at 16, joined the military at 18, and after a short hitch “bounced around from minimum-wage job to minimum-wage job.” “I had no education, so what was I going to do? Get a big corporate job?” When his in-laws asked him to join their family trucking business, he did so “driving team” — industry parlance for driving long distances with a partner. While his father-in-law slept, Odom drove their rig hundreds of miles; while Odom slept, his father-in-law took the wheel and drove hundreds more. “We never stopped,” he says, under conditions that might strike some of us as remarkably close to hell.

But Odom loved it. He tried a brief stint as a full-time employee at a firm that required him to join the Teamsters Union. The experience persuaded him that he’d never work as an employee again. In 1996, he put down $10,000 he had saved to purchase two trucks and begin his own independent trucking firm. He loved the flexibility, including the power to accept or reject offers to move cargo for any shipper. He plugged into an organization that provided discounts on insurance, tires, and fuel and offered free trailers, safety oversight, and accounting.

“Here I was, an uneducated kid from East Los Angeles, and now I own my business and I’m making $100,000 per year after expenses,” Odom says. “There’s no way that kid is going to make that kind of money in any other business.”

Talking to me from the cab of his truck in Deming, he runs through a list of recent outrages — the limitless power of government represented by Chevron deference, the related struggles of Northeast fishermen forced to carry onboard federal regulators, and other innovative government encroachments on daily life. These, and his own experience with A.B. 5, have turned the lifelong trucker into something of a public-policy expert and critic of government regulation — another unintended but utterly predictable consequence of California’s laboratory of policy chaos.