California’s Contractor Law Violates Free Speech

– January 28, 2020 Reading Time: 5 minutes

It is becoming increasingly difficult to reject the hypothesis that California lawmakers are trying to solve their state’s notorious housing crisis by driving out everyone who isn’t a lover of earthquakes, fires, to-die-for weather, and arbitrary government.

Their latest Constitutional faux pas is AB5, which, among many other things, limits California freelance journalists to 35 articles per year per publisher. Freelancer and lover of liberty Simon Constable recently ripped the law, which is chock full of loopholes and perverse incentives that will surely stymie the law’s putative goal of raising lowly gig workers into the ranks of the statutorily employed.

For starters, it makes no distinction between a routine $50 sports score update and a $30,000 feature article. It also provides no guidelines about how publishers should handle serialization, for example my recent 3-part article on the early U.S. fur industry. If I lived in California and that was published after 1 January 2020 would it count as one or three articles? And is it even journalism? (No, it is too good, at least compared to The 1619 Project, the authors and editors of which still do not understand what they did wrong.) I guess litigation will be necessary, which is ironic given that AB5 arose out of a California Supreme Court Case, Dynamex Operations West (4 Cal.5th 903).

A far bigger problem is that the portion of the law aimed at freelancers is blatantly unconstitutional, a clear violation of the First Amendment’s protection of expression and the press. But lawmakers do not seem to care.

Our friends at the Free to Choose Network have just released a three-part documentary on the history and development of the U.S. Constitution called A More or Less Perfect Union that also highlights lawmakers’ frequent indifference to the fundamental precepts of our Frame of Government. A joint project with federal judge Douglas H. Ginsburg and PBS, the series makes the point that the Framers, “even Alexander Hamilton” (here, here!), would find our current government appalling, the very swamp monster they had hoped the Constitution’s checks and balances would prevent.

Constable calls AB5 “unAmerican” and he is right. As A More or Less Perfect Union points out, America was long the beacon of liberty because of its “presumption of liberty.” That presumption, though, is long dead.

Numerous factors contributed to the government’s murder of the presumption of liberty, including paternalism, the tyranny of the majority, and political duopoly.

The root problem, though, is that American lawmakers are accountable only at the polls. Worst case scenario, they lose an election but they cannot be readily sued, fined, or imprisoned for passing stupid (and hence automatically unconstitutional) laws, even ones that impoverish or kill people. Instead of YOLO (you only live once), politicians live by the code of YOLR (you only lose re-election), which just means going back into private practice or becoming a lobbyist, consultant, author and/or TV talking point bimbo.

True, YOLR sometimes emboldens politicians to do the right thing, instead of taking the popular course. But unlike businesses, which care about every dollar, politicians only care about your vote if it will sway the result.

If some business’s policy rubs me the wrong way, I can boycott it and maybe even sue and induce ten, or a hundred, or a thousand, or ten thousand others to join me. My efforts alone may not drive the offender into bankruptcy, but our actions, however large or small, will negatively impact its position in a competitive market and thus will constrain its behavior.

If some government regulation hurts me, I can move away at considerable expense or stay and vote for an almost identical candidate associated with the other party. I might be able to persuade enough people to join me to oust the perpetrators, but YOLR. And if I can’t muster enough votes, the politicians who harmed me stay in office completely unscathed.

If you know anything about incumbency rates, which have ranged from 85 to 98 percent for U.S. Representatives since 1964 and has been almost invariably over 80 percent for U.S. Senators since 1982, you know that national politicians are almost completely unaccountable for their actions in office.

Matters are much the same at the state level. In 2018, California actually sported one of the lowest incumbency rates in the nation at a “mere” 85 percent.

Aggrieved parties can also sue but that is an expensive and time-consuming remedy. Early New Yorkers understood this, which is why their first constitution created a Council of Revision, composed of high court judges, that reviewed the constitutionality of bills before they became law. It put the kibosh on over 100 bills before lawmakers eliminated it in the new constitution of 1821. Tellingly, the Council actually declared the bill authorizing a state constitutional convention unconstitutional because it believed a plebiscite was needed to call one under New York’s existing constitution. The resulting kerfuffle sealed its fate.

Similar institutions in other states, including Illinois, also eventually drowned in a toxic stew of democratic sentimentality and legislative power grabbing.

The Constitutional Convention in Philadelphia also considered, but rejected, a national council of revision. It vested the President with veto powers instead, which is a poor substitute because presidents tend to be more concerned with their own power and re-election chances than with Constitutional scruples. SCOTUS eventually established judicial review, its authority to act as the sole and final arbiter of constitutional questions, forcing Americans to hunt down unconstitutional horses after they have left the legislative stable.

In addition to the presumption of liberty, early Americans presumed their laws were rational. If lawmakers enacted X to trigger Y to prevent Z and stated such in the law’s preamble, the law became a “dead letter” if Z continued unabated or X did not trigger Y. Many ill-considered laws fell by the wayside, nugatory but unrepealed, as if to provide us comic relief today.

To stick, laws in early America had to obtain and retain popular support (or create incentives for private enforcement, like qui tam). But today, enlarged state capacity gives many governments the power to quash whatever groups it wants to, from African-Americans via drug laws to American Indians via the BIA to freelance reporters, regardless of the (ir)rationality of their laws.

And make no mistake, AB5 is irrational because it does not take into account all available information. Most importantly, the law explicitly states that “the misclassification of workers as independent contractors has been a significant factor in the erosion of the middle class and the rise in income inequality.”

But as Phil Magness, Vincent Geloso, and others have shown, it is by no means clear that income inequality has risen to problematic levels. Even if it has, it remains unclear that government can or should do anything about it because inequality’s causes remain unclear. Some believe that the government’s own unconstitutional and irrational laws are at fault, suggesting that rollback of those laws, like Social Security, would be the place to start, not interfering in private contracts.

In fact, if the actions of Vox are widely replicated, AB5 will contribute to income inequality by supplanting numerous freelancers with a handful of employees. In other words, lots of people who earned thousands of dollars per year will be replaced by a few who make tens of thousands and many who make zero. You do the math.

What then (hand wring, hand wring) shall we do about all those poor freelancers (hand wring)?

How about nothing? Many, like Constable, want to freelance because it gives them more freedom to write when and how they want. Those struggling may be in the wrong line of work.

Freelancers and other types of independent contractors are also free to buy the benefits that they want. (This is more problematic for those based in the U.S. but only because of its dumb healthcare system.) Mandatory benefits, after all, are just illiquid wages.

Sure, some people like the security of a regular paycheck but many feel enslaved by their jobs, a sentiment that most of America’s first generations shared. The dream of most early Americans was not employment but proprietorship, to own and run their own business, be it a farm, shop, store, or professional practice. For the Founders, as for many people today, employment entailed a loss of liberty, which is probably why Cali seems bent on forcing it down people’s throats on shaky pretence.

Robert E. Wright is the (co)author or (co)editor of over two dozen major books, book series, and edited collections, including AIER’s The Best of Thomas Paine (2021) and Financial Exclusion (2019). He has also (co)authored numerous articles for important journals, including the American Economic Review, Business History Review, Independent Review, Journal of Private Enterprise, Review of Finance, and Southern Economic Review. Robert has taught business, economics, and policy courses at Augustana University, NYU’s Stern School of Business, Temple University, the University of Virginia, and elsewhere since taking his Ph.D. in History from SUNY Buffalo in 1997. Robert E. Wright was formerly a Senior Research Faculty at the American Institute for Economic Research.