Guest post by Ra Criscitiello
Over the past decade, gig economy companies like Uber and DoorDash have eroded hard-won employment protections by misclassifying workers as independent contractors. As a result, workers in the gig economy operate without basic rights like health insurance, unemployment insurance, workers’ compensation, overtime, sick leave, or breaks.
Gig economy workers are often subjected to unsafe, compromising situations without the aid of California’s employment laws. The damage of denying employment benefits has been highlighted most recently by gig workers trying to support themselves during the COVID-19 pandemic.
The COVID-19 nationwide shutdown (as of March 28th, the USA leads all nations with 100,000 recorded coronavirus cases with global contagion at 600,000) exacerbates existing, embedded structural socioeconomic inequalities. “In some respects, the pandemic is an equalizer: It can afflict princes and paupers alike, and no one who hopes to stay healthy is exempt from the strictures of social distancing. But the American response to the virus is laying bare class divides that are often camouflaged — in access to health care, childcare, education, living space, even internet bandwidth.” See recent NYT story.
Under California’s landmark AB 5 legislation, most companies must now directly employ their workers to avoid liability for misclassification. Many companies have pushed back, however, and studies indicate that the economy, and especially the COVID-19 national lockdown economy, is likely to further restructure in response to AB 5, with companies that do not wish to directly employ workers seeking out labor market intermediaries and other ways of avoiding direct employment.
It is this context that inspired organized labor and worker cooperative advocates to draft the Cooperative Economy Act (“CEA” https://cooperativeplatform.org/) to provide an additional framework for accomplishing AB 5’s goal of ensuring community-sustaining jobs with fair and full employment protections. The CEA approach uses a market-proven union-coop template currently established in numerous industrial sectors and regions from Maine to New York to Wisconsin to Ohio to Colorado and California (www.1worker1vote.org), combining collective bargaining rights with equity for gig economy workers in California’s many Coronavirus-affected industries.
In recognition of the challenge that AB 5 poses to California platform companies and other companies that misuse independent contractors to commoditize workers, the CEA offers an innovative but, at its core, already tested and proven solution. CEA incentivizes a new type of labor market intermediary, the Cooperative Labor Contractor (CLC), which would offer workers full employment security and protections, enhance workers’ control of their own labor, and allow them to share in the profits their labor creates. A CLC is a new type of staffing firm where workers are designated as W2 employees who also own and govern the business.
CEA envisions a non-profit Federation (or worker cooperative ecosystem) composed of Member CLCs and governed by a board of directors including state based CLC workers and worker cooperative development organizations. CEA, through the non-profit Federation, incentivizes the growth of Member CLCs that reflect the principles of collective, worker-based governance by requiring democratic workplace principles as a membership condition. In addition, the CEA Federation serves as a guarantor of and governing body for transparent marketplace innovation, solidarity, worker-owner-driven labor policy, and democratic worker control practices within all Member CLCs.
The Federation will offer leading-edge management and business support services to its members and will proactively develop new CLCs in specific industries. The Federation would initially be capitalized through a 10-year, 0% interest, $25,000,000 loan from the State of California. Both the Federation and Member CLCs are eligible for state tax exemption.
The CEA explicitly provides that workers providing services through Member CLCs are not employees of the companies to which they provide services, thereby relieving companies that contract with Member CLCs from employment responsibility under AB 5 and joint employment liability. This policy innovation should appeal to companies of good faith operating in California that prefer to exist without direct employment relationships and who equally grasp that adding to California’s growing socioeconomic disparities accelerating during the current Coronavirus epidemic represents a bridge to nowhere for everyone.
Incentivizing the creation of CLCs for gig platform companies allows for a healthy, safe, self-reliant, financially literate, democratically active, productive, and resilient workforce, perhaps an antidote to the climate and pandemic threats facing the state, nation, and global economies, starting with supporting the nation’s frontline healthcare sector professionals caught in the gig economy. CEA represents a first legislative step in our “American” challenge to use social distancing to flatten virus curves while uniting in socioeconomic solidarity to flatten embedded inequalities that have allowed the current pandemic to scale while leaving workers behind.