When a law is passed, our first thought is whether we agree or disagree. If we favor the law then we support it and if we do not, then we oppose it. However, that should not be the only method of evaluation. Instead, we should ask the following questions: What is the authority for the law? Is it necessary? And what is the cost?
We should be very wary of laws passed by executive order, mandate, or administrative fiat because if you give a politician that power today for a cause you approve, that same power will later be used for a cause you disapprove. Once the citizenry gives up that power it rarely gets it back. It is also worth noting that executive orders, mandates, and fiats bypass legislative process, review, and hearings. This deprives the community of input on laws that will instantaneously take affect without warning or review. An order you agree with is still unjust if there was no authority for it in the first place.
The necessity of a law will depend on who you ask. Those who benefit from the law will say it is while those who are burdened by the law will say otherwise. Those that benefit from the law are inherently biased and should be viewed with skepticism. Whereas those burdened by the law focus on what the law will do, not its stated intent which is an unreliable indicator. To illustrate this point, think of the thousands of laws that have been passed in California the past five years and ask yourself if the State is better for it? A law is not necessary just because you agree with it, and if it does not improve our society than it was not needed.
The cost of a law is often ignored because the public does not pay it directly. Yet, individuals often sacrifice liberty with compliance and chalk it up to a minor inconvenience without ever asking how many inconveniences is too many? Business owners bear the burden of paying for new laws directly as a tax or regulation or indirectly with the cost of compliance. When businesses cannot afford those costs, they leave the State or go out of business. In the end, this cost all of us.
Why do I tell you all of this? Because right now there are executive orders being issued that place tremendous burdens on the business community and undermine basic notions of liberty. These orders were issued without any legislative review, committee hearings, or community input. In short, businesses are being co-opted into government enforcers at their own expense. That is not the role businesses want, need, or can afford.
Even the best of intentions can still be problematic. Case-in-point is the CMC Steel Mill (formerly Gerdau Steel Mill) in Rancho Cucamonga that began in 1957. It employed hundreds of people for 60 years. In 2017, it announced to great fanfare with many politicians in attendance that it was “going green” to comply with California’s strict emissions standards. It was hailed as an environmental wonder with many photo-ops. In 2020, the Steel Mill closed citing California’s high cost of doing business and excessive regulatory environment. There were no photo-ops at the closing announcement, no politicians in attendance, 275 workers laid off, and a steel shortage that followed. In the end, all was lost because California law set an unachievable standard and 60 years of steel making in Rancho Cucamonga disappeared.
More recently, AB5 took effect on January 1, 2020. This law was crafted by the Legislature and signed by the Governor. It eliminated the use of independent contractors in most businesses. While this law followed the customary legislative process, the State’s authority to legislate how an individual chooses to contract their services and trade their talents for income is questionable. The necessity of the law, or so it was argued, was that Uber and Lyft were exploiting the drivers who voluntarily chose to drive for them. Lost on the politicians was the fact that these jobs did not exist a few years earlier until Uber and Lyft created them. Nevertheless, California law sought to make all workers employees and instantaneously destroyed the ability of two-million Californians to earn income as independent contractors.
The tragedy of AB5 is that the law is unnecessary. Its main target, Uber and Lyft, were able to circumvent the law with a ballot initiative (which the Chamber supported), but left for dead were the small businesses, entrepreneurs, freelancers, and sole proprietors who survived as independent contractors. The cost of their livelihood was of no consequence to lawmakers.
The negative effects of AB5 impacts everyone. For example, the trucking industry relied heavily on independent contractors (owner-operated trucks). AB5 forced them out-of-business or out-of-state. Unfortunately, approximately 40% of all imports come through the Port of Los Angeles/Long Beach. With a shortage of truckers, the wait times to unload cargo ships increased dramatically and now there is a long line of ships off the coast of California. This delay increased the cost of everything as goods, materials, and supplies are backed up worldwide because the Legislature was mad at Uber.
Bad laws have bad consequences, even if unintended, and we all pay the price one way or another. There are many other negative effects of AB5, which I will happily share with anyone who asks. It is imperative that as the electorate, the business community, and the citizenry, we voice our concerns and demand that our lawmakers stay within their authority, pass only necessary laws, and account for the costs. Anything less is unacceptable.
I encourage all businesses to join the Chamber and let their voice be heard.
