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February 27, 2020; North Bay Business Journal

Many who champion the “gig economy” argue that it offers workers flexibility. You can pick what you want to do and when you want to do it, making sure you have time to invest in yourself and your own interests. But is it actually exploitation? After all, gig workers lack the protection of minimum wage, benefits, and other worker rights that have been won over the years.

California’s Assembly Bill 5 (AB 5), passed late in 2019, makes it harder for companies to classify workers as contractors instead of as employees. Using a strict three-part test, companies will have to reclassify many of their California-based workers as employees, meaning they’ll earn at least minimum wage and are entitled to overtime, regular working hours, and breaks, among other things.

As you can imagine, many companies are actively resisting AB 5. Uber, Lyft, DoorDash, and more have vowed to overturn the law. However, Gary Quackenbush in the North Bay Business Journal, examines the effect of the law in the wine country region of Sonoma County on a different industry, small nonprofit theater companies.

When you get right down to it, many theater jobs are gig jobs, particularly in small nonunion shops. They hire actors for very short runs, paying a flat fee for the run of the show. One of the theaters in the Sonoma region is cited as paying $600 for expenses and personal needs. If they had to hire performers at normal rates, the producing artistic director says, the pay would increase to $2,000 per actor.

That is not only true for actors, but for the tech crew and the creative people who go into schools and do educational programs for students to support the show. If all of these people have to be paid like employees, the company might be able to raise prices or donated funds to cover the cost, but it might have to cut back or even risk closure. Certainly, it would require a shift in the business model.

According to Kristen Madsen, director of Creative Sonoma, “There are upwards of 200 nonprofit arts organizations in Sonoma County and a majority have small operating budgets.” Keith Baker, producing artistic director of Main Stage West in Sebastopol, says if there were many closures, it would no doubt have an impact on the local economy and culture. (After all, people who go to the theater also go to restaurants.)

But the argument does ring a little hollow. The theaters want permission to pay their people what they already know is less than they deserve. The reason? “Because that’s how we do it. We have structured our budgets using this exploitative pay scale ever since we started, and it is too late for us to change. So, if you don’t let us continue paying pathetic amounts of money to our actors, technicians, and educators, we won’t be able to stay open.”

The pros and cons of the gig economy have been argued many times. They boil down to flexibility versus stability. The actors in these theaters want to do the work and are willing to take the low pay because it gives them a chance to get on stage. It also means the theater companies can do their productions at low cost and pass that savings on to their audience in the form of lower ticket prices.

But it is also about whether or not the companies pay their fair share of employment taxes and worker compensation funds. Clearly targeting the big rideshare companies, not nonprofit theaters, Assemblywoman Lorena Gonzales, who authored the legislation, is quoted as telling companies that they can no longer game the system by misclassifying their employees.

While the three-part test that the California legislation implements is simple, implementation can be complicated; already, there are at least 50 industries that are exempt. And negative impacts on industries the law did not intend to target are evident in at least a few areas, such as freelance writers and journalists.

Amendments to the law are expected to occur. Of course, accommodations in industry to the new rules are also likely to happen. But the shape of this new labor law regime is still being worked out. Meanwhile, other states like New York and New Jersey are still considering whether to follow California’s lead and enact their own versions of the law. Is this the beginning of the end of the gig economy? Some hope so. We’ll watch and see.—Rob Meiksins