The California state capitol building in Sacramento, CA.
Building on our success with an uncertain future
Brian Bennett is the vice president of government affairs and policy at the Direct Selling Association in Washington, D.C.
In February, AB 5 was amended with its first set of exemptions. Direct sellers were in that first group.
On April 30, 2018 a different kind of earthquake shook all of California. This one wasn’t contained to a specific geographic area; rather it resonated across the state and rocked all those who’ve built their livelihoods with independent contractors.
The California Supreme Court handed down its decision in Dynamex Operations West v. Superior Court of Los Angeles. In a strange twist of events, the court had not only ruled on this case, but completely upended all companies using independent contractors in the most populous state in the U.S. States.
Immediate Reactions and Repercussions
In the state home to tech companies from Apple to Uber, Lyft and DoorDash this ruling caused a series of aftershocks. The Court had ruled that the longstanding test for determining independent contractors in the state (and one that many companies with independent contractors win their cases under), known as the Borello test, would no longer be used. In its place, would be the “ABC test,” a much stricter test that made it extremely difficult for all companies to use independent contractors.
For those working in government affairs, it’s natural for your first reaction to a legal decision that negatively impacts your business to be about determining how to pass legislation that will fix the issue in a statute or regulation.
The business community in California had a solution. With the legislative session set to end in just a few months, passing legislation to “pause” the decision seemed to be the only way to address the issue, and it would buy businesses a year to agree on, and hopefully pass, a comprehensive solution.
Understandably, the labor unions had their own plan—not just to hail the decision as the best development for workers’ rights in decades, but to push to codify the decision under statute. The 2018 legislative session ended without any legislation.
Fighting for an Exemption
Both sides were as engaged going into 2019. There were many hours spent on the phone screening counsels in Sacramento. We needed someone to represent our interests. The task was clear; secure an exemption for direct sellers under any legislation that would codify Dynamex.
In November, we heard rumblings that a bill was being drafted, and in December, AB 5 was introduced. We learned that the bill’s sponsor was looking to add in exemptions to secure business support. I was confident direct sellers could be one of those exemptions, demonstrating that our business has operated for over 100 years with an independent salesforce.
In February, AB 5 was amended with its first set of exemptions. Direct sellers were in that first group. From that point on, the association supported the bill due to its exemption for our industry. We monitored the bill closely and attended hearings throughout the legislative process until it was signed by the governor.
Representing the Industry
Most recently, on Capitol Hill, H.R. 3522, was introduced with bi-partisan support. It incorporates the IRS Code section that clearly defines direct sellers as independent contractors. The conversation around the future of work is forming.
We are part of coalitions trying to frame these conversations, but members of Congress have no obligation to listen. As direct sellers, we are uniquely positioned to demonstrate you can’t know where you’re going unless you know where you’ve been. While technology is disrupting the way we think about work, we cannot forget direct sellers, America’s original entrepreneurs.
Our Work Is Far from Over
New York Governor Andrew Cuomo has said one of his priorities next year will be passage of a California-like bill. This is without mentioning Capitol Hill, where any legislation that passes could immediately be felt in all 50 states.
Instead of ducking for cover, we need to be united and proactively stand our ground. DSA takes a leadership role identifying and strategizing to ensure legislative success. But, we can’t do it without our colleagues in the direct selling industry. Success is premised on having everyone engage, because legislators also want to see the real business owners telling their stories.
We’re happy to advocate and facilitate these opportunities to stop harmful legislation or pass helpful bills that turn into clear statutes.
I hope you have gotten a glimpse of what we do every day to make your businesses secure and hope you will join us. Know that you have tireless advocates in your corner who care for your business and your salesforce as much as you do.