Thanks to California, gig economy bills are becoming an “everywhere problem,” presently appearing in New York and New Jersey lobbying halls. Here, legal correspondent Larry Kaplan discusses the latest developments in NY and NJ with Jeff Levy, head of those states’ ACE chapters.
Attendees of last year’s Gentlemen’s Club EXPO legal panel were told, “Dynamex is not just a California problem. Dynamex is an everywhere problem. The ABC Test that is at the heart of Dynamex is coming your way and will most likely arrive in your state sooner than later.”
The “everywhere” part of that prediction inched a little closer to reality as New York recently introduced and New Jersey pre-filed (for a later introduction), bills largely mirroring California’s AB5 and mandating employment status for, among others, club entertainers.
The Dynamex panel focused on the recent Dynamex Operations West, Inc. v. Superior Court of Los Angeles California state court decision and an accompanying state legislative bill, AB5, which changes the test for determining whether a worker is an independent contractor or employee to a three-prong “ABC Test.” AB5 has since passed and was enacted Jan. 1 when it established California Labor Code section 2750.3. Based on the B-prong of that ABC Test (that the worker performs work that is outside the usual course of the hiring entity’s business), which dancers and many other so-called “gig-economy” workers cannot pass, club dancers and many other until-then independent contractor occupations must now be treated as employees under 2750.3.
Just like California’s AB5, the New York and New Jersey bills are targeting Uber/Lyft drivers, same-day delivery drivers, and other gig-workers. As such, the bills are not specifically aimed at club dancers, who represent a tiny portion of those affected but are none-the-less challenging to the adult nightclub industry.
Make no mistake, while couched as workers’ rights protection, this legislation is all about money and power. States could never collect withholding and other taxes from non-employees to help balance budgets. And organized labor unions have had no leverage to get them to join and pay dues.
As in California, if the Eastern states’ legislation passes, newly-minted employee/entertainers and other affected workers in New York and New Jersey will pay considerably higher taxes, under the new rules. Based on Trump’s 2017 tax reform, employees with median incomes will now pay thousands more than comparable independent contractors. This clashes with New York State’s 2021 tax reform that would cut taxes by 40% for those same individuals, if they were able to remain non-employees and filed taxes as small businesses.
In nationwide polls, 66% of Uber/Lyft drivers who would be affected by the required employment status don’t want it. While adult nightclub dancers work at clubs, unlike traditional employees, most choose their schedules. Many freelancers, other than Uber/Lyft drivers and same-day delivery drivers, work from home offices, buying their own equipment and supplies, singlehandedly taking the risks of their own employment. Like dancers, other gig workers are not beholden to anyone and work and take days off as they please. Like dancers, many of these freelancers can pick their kids up from school, and prioritize parenting overwork when necessary, not just when their employer allows them to.
The New York gig worker law S6699A, which is sponsored by Democratic Senator Robert Jackson, is in the state’s Senate Labor Committee. S6699A, which was patterned after California’s AB5, has the backing of the AFL-CIO, which has, of late, concentrated its efforts on political advocacy, rather than hands-on organizing.
Special note from Jeff Levy: If any statewide chapter feels that they are not getting bill information that affects their state most expeditiously, please call Jeff Levy at (954) 253-6511 or Jeff@ks-law.com. I will send you this vitally important data for your state chapter for six months for free, which will help you to better challenge any harmful bills and protect your business. See our bill tracking info. You will receive the same information weekly. However, if a bill against adult nightclubs, shows up in your state, you will get the information immediately, not weeks later. Again, this service is free. ACE of New York, ACE of New Jersey, and The Pennsylvania Hospitality and Entertainment Association want all adult nightclubs to succeed.
S6699A’s New Jersey counterpart, S863, is sponsored by Democratic Senator Stephen M. Sweeney and has been pre-filed for introduction in the current 2020 legislative session.
In addition, on Jan. 29, New Jersey Gov. Phil Murphy signed into law three bills that dramatically increase the potential jeopardy for businesses that rely on independent contractors. One new law, AB5839, increases the penalties for misclassifying employees as independent contractors. Another new law, AB5840, imposes large escalating liability on businesses—including potential liability on individual managers—for using staffing companies that misclassify workers as non-employees. The third new law, AB5843 adopts a new “conspicuous posting” of notices of employee misclassification benefits and protections, criteria to discern between employees and non-employees and anti-retaliation provisions.
When it became the law of the land, California Labor Code section 2750.3 exempted certain occupations, including insurance and real estate licensees, certain healthcare professionals, registered financial advisers, direct-salespersons, licensed barbers, cosmetologists, and some B2B companies. Less than a week later, AB5’s author, assembly member Lorena Gonzalez introduced legislation, AB1850, to add “exemptions or clarifications” to exclude even more occupations from the employment requirement. These include certain journalists, musicians, and fine artists. And Gonzalez left the door open to add additional carve-outs to AB1850.
And on Jan. 16, a federal judge in San Diego issued a preliminary injunction against enforcement of 2750.3 against the trucking industry. Additional litigation from Uber/Lyft and other groups is also pending and, in the meantime, the ride-hailing firms have said they simply won’t comply. These large players and others affected are not taking 2750.3 sitting down in California. Nor will they in the Eastern states.
For 15 years, Jeff Levy has run adult nightclub associations in New York, New Jersey, and Pennsylvania. Under Levy’s leadership, the three states have fended off at least 40 state and local legislative challenges. Levy employs sophisticated legislative bill-tracking systems and receives updates from the ACE National association to stay up to speed on upcoming bills in the states he represents and keep his association members informed.
Levy explained one of the keys to success is that club owners, who years ago treated any competitor as an enemy, have over time learned to trust one another and work together through the associations for the common good. The unity of his associations’ members has been Levy’s single strongest asset.
Levy reported that he is keeping members up to date on the legislation and he and association members are currently fact-finding and in discussions on developing innovative strategies to protect against the bills. Levy is optimistic about the chances of the two states’ clubs walking away with positive outcomes.
Make no mistake, while couched as workers’ rights protection, this legislation is all about money and power. States could never collect withholding and other taxes from non-employees to help balance budgets. And organized labor unions have had no leverage to get them to join and pay dues.
He noted now is not the time for club operators with huge investments and hundreds of workers and entertainers who are counting on them to sit on the sidelines and hope that someone else will do their share. The more adult clubs in New York and New Jersey that are not currently state association members who get on board now and pitch in, the greater the likelihood of success.
A lot can happen before the AB5-cloned bills pass out of New York and New Jersey’s legislatures. While educated guesses can be made as to what specific carve-outs, exemptions, and clarifications will be negotiated, there is no certainty at this point as to exactly what the employment mandates in the two states will look like if passed. Stay tuned.
To join or support the ACE of New York, ACE of New Jersey or the Pennsylvania Hospitality & Entertainment associations or for further information, contact Jeff Levy at 954-253-6511 or email jeff@ks-law.com.
Larry Kaplan has for 19 years been the Legal Correspondent for ED Publications. Mr. Kaplan is a business broker in the sale and purchase of adult nightclubs and adult stores and the Executive Director of the ACE of Michigan adult nightclub state trade association. Contact Larry Kaplan at 313-815-3311 or e-mail larry@kaplanclubsales.com.
