Did Assemblywoman Lorena Gonzalez (D-San Diego) — the author of the disastrous AB 5 law that has cost hundreds of thousands of independent contractors in California their livelihoods — use bogus data to help get her onerous labor bill passed in 2019?
According to the Berkeley Research Group (BRG), the answer is an unequivocal yes.
A former union organizer turned legislator in District 80, Gonzalez has stated repeatedly that the state of California loses $7 billion a year in payroll tax revenues because of independent contractors.
As it turns out, her claim is without evidence and has no basis in fact, according to William Hamm, managing director of Berkeley Research Group’s San Francisco Bay Area office. His team helped lead a study beginning in 2019 about the fiscal impact of independent contracting in California.
“Her claim is utter nonsense,” said Hamm, former head of the non-partisan Legislative Analyst’s Office in California. “Anyone who cites this $7 billion number is doing so knowing full well that it is completely bogus.”
Gonzalez quoted this dubious number on April 3, 2019, when she first introduced her AB 5 bill to the senate labor committee and cited the labor commissioner as her source.
Meanwhile, her press release from Sept. 17, 2019, cited the “Division of Labor” as the source, while the current AB 5 “fact sheet” posted to her website touts the number as coming from the Division of Labor Standards Enforcement.
AB 5 was signed into law in September 2019 and went into effect on January 1, 2020.
A colleague of Hamm’s and managing director of BRG’s Century City office, Dr. David Lewin spent three intensive months with his staff attempting to track down the $7 billion number.
Not a single person they talked to at any agency in California could verify the number, including at the Division of Labor Standards Enforcement, he said.
“We did a lot of sleuthing and detective work to try to find out where this $7 billion figure comes from,” said Lewin, a former Columbia University professor and currently the Neil H Jacoby Professor Emeritus of Management, Human Resources, and Organizational Behavior at the UCLA Anderson School of Management.
“We talked with all of the agencies in California at every level. We went through a ton of documents. We couldn’t find anything.”
Eventually, we did find what we were looking for. It turns out that in 2012, a report issued by an Obama Administration commission headed by Joe Biden stated that the nation, not California alone, loses $7 billion because contractors don’t pay payroll taxes—not annually, but rather over a 10-year period. Their report covered all people who provide contracting services, not just those in rideshare and high-tech.”
Lewin and his team then analyzed numbers to determine the actual potential loss to the state of California annually due to independent contracting.
The loss is closer to zero, he said. In fact, in the rideshare and delivery sector alone, the state would actually gain about $111 million annually from the independent contractor arrangement relative to the employment arrangement, they found.
“That supposed $7 billion putative annual revenue loss in California due to independent contractors has no basis in fact or in empirical evidence whatsoever,” affirmed Lewin.
The $7 billion estimate continues to be promoted to this day, not just in California, but nationally.
On June 16, 2021, the Economic Policy Institute published a paper entitled “Misclassification, the ABC Test, and Employee Status—The California Experience and its Relevance to Current Policy Debates,” written by former AFL-CIO General Counsel Lynn Rhinehart.
Recently appointed to the Biden Administration’s labor-policy team, Rhinehart repeats the same bogus $7 billion number from California in lost payroll tax revenue and cites AB 5 itself (aka Lorena Gonzalez) as the source.
This isn’t the only instance of Assemblywoman Gonzalez using bogus data to justify her disastrous AB 5 law.
In 2020, she continually refused to grant the language industry an exemption from AB 5, insisting that 4,111 interpreters and translators had supposedly been misclassified over a five-year period and therefore needed the “protections” of AB 5.
It wasn’t until an industry advocacy group obtained the actual data via the Public Record of Information Act that her assertion was proven false. The real number was a small fraction of that, less than 6 percent of 4,111, possibly even smaller. Only then did the industry receive its coveted exemption from AB 5.
In an official statement in August 2020, the Coalition of Practicing Translators and Interpreters of California stated: “We fact-checked the statement the author of AB 5, Assemblywoman Lorena Gonzalez, made on the Assembly floor on May 20, 2020, and repeated in other forums about the misclassification of 4,111 interpreters. We found it not to be based in fact. Misleading claims should not drive state policy.”
Indeed not. Assemblywoman Lorena Gonzalez and proponents of national bills like the PRO Act should refrain from peddling fiscal falsehoods about independent contracting.
The ongoing dumpster fire of AB 5 is a cautionary tale that continues to destroy countless careers and livelihoods across a vast swath of professions in the once-Golden State.
When authors of bills in Sacramento play loose with the facts, everybody loses, including colleagues who were swayed by inaccurate data when they voted in favor AB 5 and then later had to answer to angry constituents. This is just one of many reasons that the repeal of AB 5 is justified, imperative and long overdue.
Karen Anderson is the founder and administrator of Freelancers Against AB 5.