If You're a Solo Entrepreneur in a Blue State, Get Politically Aware Right Now to Save Your Business

The problem isn't unions and employee status so much as it is a rush that might not make distinctions.

If you're a solo entrepreneur in the b-to-b world, even if you work for multiple clients, and you live in a blue state with union ties, you may find yourself facing a problem. It's one that's popped up in California and New Jersey. Depending on political conditions, this is something that could possibly go national, expanding beyond any single state.

At issue is worker classification. There are many people who run independent business owners that provide services including writing, photography, legal, accounting, driving, trucking, janitorial, real estate, travel, and so much more. Often, they're doing work for other businesses, or for consumers but through other businesses, like a Lyft or Uber driver offering taxi-like transportation for people.

These business owners are exactly that. They have clients, market themselves, pay the expenses of the business, insure or self-insure, improve their skills through training, and otherwise act every bit like smaller-scale versions of mid-sized and large corporations.

And then there are many companies that want to treat workers as "contractors." These businesses push people into supposed states of self-employment that are ways for the companies to avoid extra costs and push them onto the workers. The employers that do this have a clear motivation: save money. Reduce payroll taxes and regulatory requirements, push costs onto workers and let incomes slip to help cover them, and still keep full control over putative contractors.

There is also an emerging third class of people working in positions that seem to fall somewhere between being an employee and someone self-employed. Many gig workers have some of the freedom of solo entrepreneurs (although solo entrepreneurs who want success might argue that it's freedom to put in more hours) but they lack the full control. They get paid for the time they put in but may not be able to set enough of an income floor to cover the full costs of putatively being on their own.

The third category is in such uncertain transition that established aspects of business, labor, and government still largely split the world between the first two. Various factions are battling out their interests by focusing on the test for whether someone is an employee or not. There are multiple tests that vary depending on the particular application and whether state or federal regulation is involved. The move has been to move from standards with many factors that require significant interpretation on the specifics of a situation to the so-called ABC test: a worker is independent if not under the control of the company, doing work outside the usual course of business of the company, and engaged in an independent business.

One of groups pushing for a change is unions that want many currently classified as contractors to be treated as full employees. And they're receiving a lot of attention from legislators in blue states with a heavy sympathy for unions.

One of the main sponsors of AB-5 in California, a battleground state of struggle between unions and companies that push for contractor status, is a former CEO and secretary-treasurer of the of the San Diego and Imperial Counties Labor Council, AFL-CIO. Names behind the New Jersey bill include a vice president of the International Association of Iron Workers and the business manager for a local of the International Brotherhood of Electrical Workers.

New Work is considering similar legislation filed by state Senator Robert Jackson that would move the state clearly into the ABC test camp. Jackson is a member of the labor and New York City education committees, both suggesting strong interactions with unions.

This isn't to suggest anything bad about unions so much as their power in certain states has created fast-track legislation. In California, it was a particular problem for many independent media people because the new law there provides for hard limits on how many pieces of work they can do for a given publication: 35 in a year. Already there are stories coming from freelancers that they are losing existing business relationships over this. Although there is talk of fixing the legislation, that can't happen until next year, after the law has taken effect.

In New Jersey, the structure of the law was so draconian that many experienced independent business owners became concerned that they would effectively be forced out of business. A hard press by many caused legislators to revisit wording, although no one has seen a public version of the new variation and so saying whether it helps or not is premature. But even that change required massive effort that only happened because of the California disaster, as some legislative staff told me.

The lesson is that entrepreneurs cannot sit idly and say that politics is someone else's business. You now have to become an effective advocate for your own interests--work with colleagues and across occupations to lobby. If you're in states that support unions, expect that things could happen quickly and without the breadth of insight that can result in eliminating the problem of pseudo contracting pushed by some companies while safeguarding the opportunities for those who are truly in business.