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Eric Addison, right, owns 100 Acres Film, an independent video production company in San Diego, said independent contractors are worried the state is targeting their clients with audits and potential fines during the COVID-19 pandemic. Courtesy photo
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Contractors, freelancers on edge about COVID-19 unemployment relief

REGION — Unemployment benefits, and how the state is authorizing those funds, have many freelancers and independent contractors on edge.

Many are worried filing for unemployment will trigger an audit from the Employment Development Department to their clients as a result of the controversial law Assembly Bill 5. 

The law prohibits companies from hiring contractors unless the business can prove the individual meets the ABC and Borello tests. The law expanded the Dynamex decision by the California Supreme Court in 2018, which ruled on wage orders for only two contracted drivers for the company.

There are currently more than 30 bills in the legislature to amend or repeal AB 5.

JoBeth McDaniel, Eric Addison and Dan Chan all contractors in various industries across the state, had varying interpretations of the process, but all railed against the state, especially the bill’s author, Assemblywoman Lorena Gonzalez (D-San Diego) for a lack of action regarding contractors and their unemployment claims.

Numerous other contractors or businesses contacted for this story declined to comment citing their fear of retaliation from the state.

Congress, meanwhile, included independent contractors and freelancers in its Pandemic Unemployment Assistance (PUA) program through the CARES Act, but therein lies a problem, the three said. The EDD has not rolled out the federal program and the only way for contractors or freelancers to access unemployment funds is by claiming they were misclassified employees.

However, freelancers who have paid into the Unemployment Insurance Program can access those monies. The federal government, though, is using tax returns from 2019 or 2018 for its stimulus payments to individuals.

California Labor Secretary Julie Su has repeatedly said on social media and virtual calls that only “true independent contractors” will not trigger audits. Those claims, plus the state’s actions, have left many contractors fearful of filing claims.

McDaniel, a freelance journalist in Los Angeles who is also a caregiver for her mother-in-law, said she has filed for unemployment benefits saying she was self-employed. An outspoken critic of the law, Gonzalez and Democrats who support it, McDaniel said her clients are no business of the state and stated herself as self-employed on the forms.

“If they start asking for the names of my clients, I tell them to go pound sand,” she added. “This is federal relief. They (the state) don’t need any of that information.”

Also once an adjunct professor and union member, she railed against the state for its lack of healthcare and other professions for state employees such as adjunct professors and per diem nurses.

Additionally, contractors put on part-time status will not receive unemployment.

“They’ll be paying in but not able to draw out,” McDaniel said of part-time employees. “That’s a Ponzi scheme because it was all set up for 1950’s ‘Leave It to Beaver’ there goes Ward to his full-time W2 job. Get your own house in order first.”

To date, 1.9 million claims due have been received by the EDD, according to the East Bay Times. It’s 300,000 less claims than from the fallout of the 2008 Great Recession, the paper reported.

California has yet to roll out the federal Pandemic Unemployment Assistance program for freelancers. Courtesy photo

The number of unemployment claims has paralyzed the EDD as the Legislative Analyst’s Office reported the EDD usually issues about 80% of first benefit payments within 21 days of receiving a worker’s application, but it’s anticipated that the first benefits will now “take much longer,” according to the Sacramento Bee.

In addition, congressional Democrats are also attempting to attach the PRO Act (Protecting the Right to Organize) into the next stimulus. McDaniel, along with many others, noted it would eliminate independent contractors entirely with no exemptions like AB 5. 

Addison, owner of 100 Acres Film video company in San Diego and is an independent contractor for the past 17 years. He said outside of Hollywood, the crew members are all freelance. 

Addison said all workers now must set up as a business rather than independently after a meeting with Gonzalez. She has repeatedly stated AB 1850 will add clarifying language and the process was a “fix-it-as-you-go” process.

“I think it’s a horrible way to govern,” Addison said. “I think the bill was poorly thought out, badly written and tries to paint with too broad of a brush. Even the employment attorney’s we’ve met have said you can follow all these things an EDD officer can easily say ‘I don’t see it this way’ and now you owe the fine. If you look at who backs Lorena, that answers all your questions about who this law is supposed to help. She gets all of her money from unions.”

He said the potential blowback in the industry is not hiring someone who caused an EDD audit. Addison said it’s worrisome, but celebrated the federal government’s acknowledgment of freelancers. Also, he said the state should follow the federal government’s lead.

“If this thing is so serious that we need to stay in our homes and not doing anything and shut everything down to kill it (the coronavirus), AB 5 should be repealed,” Addison said. “There should be no worry about audits or repercussions from filing for support and relief. There should be just no worry if it’s as serious as they’re telling us it is. The fact there is that concern is shows the level of distrust in our government and how bad that bill is.”

Chan, a magician in the Bay Area, said his $160,000 annual salary has disappeared. Once ensconced in Silicon Valley in the tech sector, his transition was due to his love of magic and performing.

But now, he’s struggling to land work and stressed how AB 5 does not address the nuances of specific industries and how they operate.

Additionally, he is struggling with how to navigate the EDD and collecting his unemployment through the PUA, as it has yet to be rolled out.