A bill that would make it nearly impossible for tens of thousands of California travel agents to remain as independent contractors (ICs) has passed a key Senate committee and is moving towards a full member vote this September.
California’s AB5 passed the state Senate’s Labor, Public Employment and Retirement Committee 4-1, at a hearing Wednesday, as hundreds of residents who could be impacted by the law descended on Sacramento to protest and lobby key legislators.
According to reports, the version of AB5 that passed includes recently added exemptions for construction contractors, business-to-business services, freelance writers, graphic designers and podiatrists. These were added to the existing carveouts for an already lengthy list of medical professionals, as well as lawyers, architects, accountants, insurance agents, investment advisers, real estate agents, and hairstylists/barbers.
It was unclear Wednesday night whether travel agents were added to the list of exemptions. Betsy Geiser, vice president, Uniglobe Travel Center, who spent part of her week lobbying in Sacramento, told Travel Market Report Tuesday night that it didn’t appear travel agent ICs would be added before a vote Wednesday.
“I am hopeful that we will get the amendment we need. If we don't get the exemption this week, we still have some time before it goes to the Senate for a vote. We are in for the fight, so keep your fingers crossed,” Geiser said.
Indeed, at the end of the hearing, legislators agreed more revisions are coming as AB5 heads to the Senate Appropriations Committee.
AB5 is based on the California Supreme Court’s “Dynamex” decision, which states that to declare a worker an IC, a business must prove that the worker: 1) is free from company control; 2) performs work not central to the company’s business; and 3) has an independent business in their industry. All three of these conditions must be met to classify the worker as an IC.
Experts estimate that hundreds of thousands of independent contractors working in California could be impacted, including drivers for Uber, Lyft and Grubhub, as well as salon workers and others. These workers would then be eligible for benefits such as unemployment insurance, paid parental leave, overtime pay, and workers’ compensation. (California estimates it loses $7 billion in tax revenue each year from employees classified as ICs.)
Some advocates and legislators feel these workers are earning lower and lower hourly wages, with fewer and fewer benefits. “AB5 is a new and innovative approach to address inequality and dignity in the workplace,” Assemblywoman and bill sponsor Lorena Gonzalez, D-San Diego, told the committee.
Travel agents and independent contractors have been swept up in the controversy, but the bill’s future impact on travel agents remains unclear.
The American Society of Travel Advisors (ASTA) and the California Coalition of Travel Organizations (CCTO) say AB5 would hurt host agencies and similar companies, and impact ICs who prefer the flexibility of setting their own schedules and running their own businesses.
If AB5 passes California’s Appropriations Committee, it would head to a full Senate vote – likely in September – and then to California Governor Gavin Newsom for his signature. Newsom is heavily backed by a coalition of labor unions and associations, but also is close to the state’s tech industry.
Meanwhile, legislators and executives from some of the targeted companies are negotiating to offer protections for workers, including minimum wage levels and benefits, and avert the law’s passage as it is currently written.
In testimony at the Wednesday hearing, Courtney Jensen, executive director for California and the Southwest at the trade group TechNet, said, “All sides agree: We need to strengthen and expand the safety net for on-demand workers.”
For its part, ASTA is holding a webinar for all of its members on July 16th at 2 p.m. to talk about its plan of attack moving forward. Advisors can register here.
Agents educate legislators and share their voices
In discussions with legislators prior to the vote, travel agency advocates, including ASTA and CCTO, tried to explain how their industry operates, and pressed for a carveout for travel agents.
Meeting with legislators were Peter Lobasso, ASTA general counsel; and ASTA board members Brian Chapin, senior director supplier relations, Ensemble Travel Group, and Geiser. CCTO President Diane Embree, was scheduled to testify Wednesday.
Chapin told Travel Market Report that the staff from the Senate committee “was receptive” to understanding the impact on the industry.
“A few of the offices were very eager to listen and learn, asking quite a few questions and really trying to understand the role of travel advisors, their functions and also the need for the exemption. They did seem interested in trying to help,” he said Tuesday night.
“We spent a lot of time explaining our industry and how 20% of travel advisors are independent contractors,” Geiser said, “and that in our industry, many travel advisors chose this route because they want to have control over their client base, their branding, the hours they work, and the suppliers they work with.”
On a website tracking the bill, Debbi Sturch, co-owner of Tek N Travel, in San Diego, California, wrote: “I am a travel advisor. I am also an independent contractor and I have NO desire to be an employee. I do my own work. I work with whomever I please and no one tells me what to do.”
The group also shared new research that demonstrates the potential impact on their industry. If the law eliminates independent status for agents, 41% of respondents said they would choose to leave the industry or relocate to another state to practice their profession, according to the research (a copy of which Travel Market Report has not yet obtained). Some 85% of ICs participating in the survey said they are very satisfied being an IC.