Will AB 5 Drive Technology Consultants Out of California?

Will the recently passed AB 5 drive independent IT contractors, engineers, and software engineers from California to other states? That is a potential outcome that Russ Harrison, Director of Government Relations of IEEE-USA, suggests in the above interview filmed at the conclusion of a Consultants’ Network of Silicon Valley (CNSV) event on this topic. He suggests the vagueness and inconsistencies of the law are creating uncertainty for employers and contractors.

Walt Maclay, owner of Voler Systems, a decades-old, successful consulting firm, alluded to the impending and uncertain changes this law will bring when it starts to take effect on January 1st, 2020.

“This is what your clients will soon be thinking and doing under AB 5. It will change your consulting practice.”

The intent of the law was to protect gig workers. But, as Harrison states, there is a huge difference between someone getting temporary, semi-skilled work via an app and a computer software engineer with decades of training. And the law’s exemption for licensed engineers doesn’t apply to software engineers or IT contractors; professions that do not have state licensing programs.

As was shown in the presentations at the Nov. 12 CNSV event, and as stated by consultant and CNSV Director Brian Berg in this excellent article, there are steps, such as forming a company, having a web presence and belonging to an organization like CNSV, that should create a more of business-to-business relationship that would protect the consultant from being viewed as an employee of their client. Still, as pointed out in this article, co-authored by IEEE-USA president Tom Coughlin and Harrison, even with a corporate shell, AB 5 could make it more difficult for new consultants to get their first client.

Of course, for many engineers, it may be easier to move to a different state than to create a business structure. On the flip side, the uncertainty could cause businesses to look outside of California for independent contractors to avoid the ambiguities of AB 5. Time will tell what the impact is, but the call to action from this meeting was clear that now is the time for independent software, IT contractors and engineers to voice their concerns to their state representatives.

Note: Viodi is a CNSV member and will be editing the entire presentation from the 11/12 meeting, so stay tuned.

In the meantime, as referenced above, here is the link to the CNSV event for more information:

6 responses to “Will AB 5 Drive Technology Consultants Out of California?”

  1. Ken Pyle Avatar
    Ken Pyle

    This legislation could have a negative impact on Taxi drivers, which would be an ironice unintended consequence for an industry that has been hurt by the rise of ridesharing providers. 

  2. Ken Pyle Avatar
    Ken Pyle

    And a few Tweets regarding the impact of AB5

    and it is even impacting freelance musicians.

  3. Ken Pyle Avatar
    Ken Pyle

    There are several bills currently under consideration to refine, reform or remove the law including:

    SB875 – which would exempt interpreters and translators
    AB1850 – which is a reform bill
    AB1925 -exempt employers who employ fewer than 100 workers
    AB1928 -overturn AB5

    Apparently, (although not confirmed) these bills will be submitted to their respective committee by 2/21/20.

  4. Ken Pyle Avatar
    Ken Pyle

    This article, by Locke Lord, LLP’s Richard Reibstein, provides an excellent summary of the potential for an AB5 type approach for the entire U.S. given the change in administration.

  5. Ken Pyle Avatar
    Ken Pyle

    IEEE’ Russ Harrison provides an update on federal legislation that could impact consultants, as well as AB5.

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