The AB5 Experiment – Should States Adopt California’s Worker Classification Law?

A worker’s classification as either independent contractor or employee drives whether a worker is entitled to minimum wage, overtime, worker’s compensation, unemployment compensation, anti-discrimination protection, NLRA protections, and many other safety-net protections. During COVID-19, unemployment protections were extended to independent contractors, but this is not the norm and likely will not continue post-pandemic. Classifying certain workers, particularly those who work in the gig economy, is challenging, so states are looking for an answer – either through their own innovation or through that of other states. California’s answer was AB5. AB5’s goals were to correct misclassification issues for app-based drivers and other workers. A plethora of workers including court reporters, freelance writers and photographers, coaches, truckers, performing artists (mimes, magicians, comedians, etc.), and musicians rebuked AB5. AB5 is well known beyond California’s borders as it received, and continues to receive, nationwide attention because it reclassified app-based drivers (such as Uber, Lyft, DoorDash, etc.) as employees. This reclassification was ineffectual because Uber’s Prop 22 passed in November 2020 rendering app-based drivers exempt from California’s worker classification law. As Justice Brandeis said, one of the benefits of federalism is that states can act as “laboratories of democracy.” Experimental federalism can provide for collective learning across the states if they are all experimenting, but often states look to one another for innovative solutions so that they can free-ride instead of experiment. Some states that are looking for an improved worker classification law seek to learn from, and potentially free-ride on, California’s AB5 “experiment.” In considering whether to adopt AB5 or a similar statute, states should consider, at a minimum, three factors: relevancy of the law to their state, ease in obtaining information about the law, and the costs to adopt, implement, and enforce the law. This article assists policymakers and interest groups by providing a detailed look at the AB5 experiment including the impact of Uber’s Prop 22. This article applies the aforementioned three factors and determines that California’s law, while well-intentioned is likely not valuable for, or adoptable by, other states or the federal government partly because it contains 109 exemptions. Ultimately, this article concludes that to maximize the benefits of experimental federalism, a group of states, both homogenous and heterogenous to California, should experiment with more novel approaches to reach a more optimal solution to worker (mis)classification. Adopting California’s worker classification law will result in states following a sub-optimal law and delay states from reaching a better solution. Workers need protections, but California’s worker classification law does not sufficiently satisfy this need.