Happening in California 31.6
Welcome to Happening in California, a brief look at political news, insights, and analysis of the world’s fifth-largest economy.
California’s legislative session ends in less than a month and the scramble is on to get bills through to the governor’s desk.
Each year there are a handful of seemingly well-intentioned bills that become law, but quickly go awry. For example, AB 5 (the 2019 gig-worker bill) changed the classification for independent contractors; it turned into a $200 million plus ballot measure funded primarily by Uber and Lyft. And even now, the Legislature is still cleaning up the mess by passing exemptions for various industries.
Here are a few of the hot bills that if passed, will have major externalities in California ...
Cheers,
Tom Ross | President and CEO | Swing Strategies
P.S. Please feel free to forward this email along to friends and encourage them to sign up here.
The Big Picture: California’s legislative session ends on September 10. The recall election of Governor Gavin Newsom is on September 14. Even if the recall is successful, Newsom will remain governor for another 38 days — giving him ample time to sign some of the most far-reaching, contentious bills.
AB 616 - Agricultural Labor Relations, "card-check"
AB 616 eliminates secret ballot elections for union organizing of farm workers, which would provide a huge win for United Farm Workers (UFW). The union had as many as 50,000 members in California during the 1970s but membership has declined with fewer than 6,500 today. UFW may be able to reverse the trend if given the power to impose “card-check.” California farmers are already under pressure from rising regulatory costs and are fallowing fields as drought conditions worsen.
The Bottom Line: AB 616 could cause significant labor challenges and hurt the competitiveness of California agricultural products.
AB 701 - Warehouse Distribution Centers
The author of California’s gig-worker law (AB 5) that nearly caused Uber and Lyft to cease operating in California, is now going after Amazon with AB 701.
The bill’s purported aim is to protect workers from productivity quotas in distribution centers. However, the bill is so broadly written that it will impact all sorts of warehouses — severely disrupting the supply chain and incentivizing future warehouse development to locate in neighboring states: Nevada and Arizona.
Even worse, AB 701 expands California’s costly PAGA statute into warehouses that lead to more frivolous lawsuits for employers.
The Bottom Line: The pandemic already caused massive disruptions to the supply chain which has led to higher prices. AB 701 will ultimately increase California’s sky-high cost of living even further as warehouse operators contend with more lawsuits and less productivity.
AB 1177 - California Public Banking Option Act
AB 1177 would create the only state-owned, state-run bank other than the Bank of North Dakota which was founded more than one hundred years ago. The idea is to help underserved communities, but good intentions don’t always deliver good results. Take California's Employment Development Department for example. It made more than $30 billion in fraudulent payments during the pandemic.
The Bottom Line: AB 1177 will likely create new liabilities for the state — increasing pressure for higher taxes.
SB 727 - General Contractor Labor-Related Liabilities
SB 727 aims to combat wage theft in the construction industry, but it’s severe penalties are off target. Under current law, if a general contractor pays a subcontractor who commits wage theft by failing to pay its employees, then the general contractor is required to pay a second time and make the subcontractor’s employees whole. SB 272 will force general contractors to pay yet again through damages and penalties worth 15 times the actual cost.
The Bottom Line: SB 727 will increase the cost for housing ever further — squeeze working families who can ill afford California’s $800,000 medium home price.
The Takeaway: While the recall is grabbing all the headlines, the final month of this legislative session may have longer term consequences for taxpayers and businesses.
Give us a ring or shoot us an email if you’d like to chat about what’s happening in California.