In a May 14 news release, the state’s Employment Development Department (EDD) announced 4.7 million unemployment claims had been processed since March 14—more than 350,000 in the second week of May alone.
But independent contractors do not qualify for the state’s traditional Unemployment Insurance.
And receiving any aid through the $2 trillion Coronavirus Aid, Response, and Economic Security Act (CARES) has proven difficult—even after the state opened the Pandemic Unemployment Assistance (PUA) portion to include contractors on April 28.
“It really feels like a war against the self-employed,” Los Angeles-based attorney Michael Alfera told The Epoch Times. “There are people that really feel this way, and understandably so.”
Independent contractors are still reeling from the new AB5 law, which went into effect on Jan. 1 and has been compounded by the COVID-19 pandemic. The law, which left thousands of them without jobs, requires companies to hire independent contractors as employees, provide benefits to them, and pay commensurate taxes.
Gig Workers Penalized for Employment
The PUA was intended “for people who do not otherwise qualify for regular unemployment insurance,” according to Alfera. However, if a gig worker also had a temporary job within the last year and filled out a W2 tax form, this hybrid worker would suffer for it.
“If you have any W2 employment in the past 18 months, no matter how small, they’re going to calculate your assistance based on that amount,” Alfera said—even if you made a lot more money as a freelance contractor.
Independent contractors say that a hybrid gig worker with a yearly income of $80,000 would receive a weekly unemployment benefit of only $52, if $75,000 of it was earned freelance and the worker filled out a W2 form for the rest. A full-time employee or freelance worker with the same income would receive a weekly benefit of $450.
Under current state regulations, a worker cannot receive both PUA and traditional unemployment insurance benefits, the EDD told The Epoch Times via email.
“If EDD has wages reported from an employer over the last 18 months that would qualify you for a regular UI [Unemployment Insurance] claim, then the EDD is required by law to proceed with a regular UI claim for you,” the email stated.
Alfera called the state’s interpretation of the rules “draconian.”
“That disparity will now then mean that an independent contractor who happens to have one little W2 job that knocks them out could be losing up to $1,600 a month in benefits, because of this decision,” said Alfera.
“I’m not even sure that the EDD interpreted it correctly,” he added.
Independent contractors with dual earnings are petitioning on Change.org for the EDD to grant them both types of benefits, or allow freelancers to choose PUA.
The EDD said it does not “track unemployment or pandemic assistance claims on the basis of employee status.”
Workers Have Difficulties
Dozens of gig workers in the Facebook group Freelancers Against AB5 shared their woes.
Jennifer Walsh, an independent accountant whose clients are also freelance, told The Epoch Times she is “slightly angry and frustrated.”
“My clients have put my projects on hold until this is over,” she said.
Walsh hasn’t earned anything since March 20. She said she applied for an Economic Injury Disaster Loan Emergency Advance of $10,000 on April 6, but never received a status update.
On April 28, she applied for PUA. So far, she has only received confirmation-of-application emails from the EDD, and it’s “a bummer.”
Other independent contractors worry about applying for assistance through the EDD, fearing they will be flagged for audits.
One source, who asked not to be named, told The Epoch Times in February that she is facing a retroactive audit of up to $200,000 because she hired 190 independent contractors for her referee business, and was flagged for it. If it holds, it will bankrupt her, she said.
The EDD confirmed that “Benefit audits are conducted by the EDD on a daily, weekly, and quarterly basis by cross-matching information provided by employers against information provided by claimants.”
“EDD has continued to conduct audits, even during this period of record unemployment,” Assemblyman Kevin Kiley (R-Rocklin) told The Epoch Times. “They’re taking personnel that could be used to process unemployment claims and they’re sending them out to audit small businesses who are struggling to get by.”
“Over four million people who are unemployed need to have all the work opportunities that are available,” he said.
Calls to Suspend AB5
Kiley—along with many other Republican lawmakers—has long been a vocal opponent of AB5. But many attempts to overturn or amend the law have failed.
Many gig workers would have had opportunities to work from home during the lockdown, Kiley said, if not for “hundreds of professions that have been more or less banned by AB5.” He cited online tutors, telephone translators, and virtual assistants as examples.
“The law has proven to be absolutely devastating even before the virus,” he said.
Assemblywoman Lorena Gonzalez (D-San Diego), who helped draft the original AB5 bill, continues to defend the law.
“I understand there are real people who don’t like AB5. Even legitimate independent contractors who are caught up in the massive reforms we’ve made. That’s why we continue to add clarity,” she said via Twitter on May 16.
She added that “most who have suffered for decades as misclassified workers” are “often afraid to speak up.”
Gonzalez did not respond to The Epoch Times’ request for comment by press deadline. She has mentioned previously that future exemptions are possible.
Alfera, a “lifelong Democrat” and freelance musician, said AB5 will make entertainment industry projects “so much harder in California.”
“Which is so ironic, I think, because of what our reputation in the country is for innovation,” he added. “This is not an innovative law—and I think it’s really gonna put a damper on a lot of that.”
The most recent data from March indicated a 5.3 percent unemployment rate in the state. Statistics for April are due to be posted on May 22.