Los Angeles Business Journal

And here I thought California was supposed to be creating jobs and trying to reignite the economy, not destroy it. A bill recently signed by Gov. Jerry Brown – SB 459, now dubbed the Job Killer Act – is just one more example of how unfriendly the state is to businesses, especially small businesses with fewer than 100 employees.

According to the U.S. Census Bureau, there are 331,479 small businesses in Los Angeles today. These businesses cannot always afford and don’t always need full-time, long-term employees so they outsource some of the work to outside contractors. With the new legislation becoming effective Jan. 1, employers will be discouraged from hiring independent contractors by penalizing those who “willfully misclassify” such services with fines up to $25,000 per violation.

Were businesses able to weigh in and help craft this new legislation before it was passed? Not really. This bill was sponsored by the labor unions of California to increase the pool of people eligible for membership for their unions. Thus the bill sailed through the policy committee and the Senate on a straight party-line vote of Democrats versus Republicans, showing the power of the labor unions in California’s capital.

This is already becoming a great scare tactic as I am hearing small-business owners say they will no longer hire independent contractors and how much it is going to hurt their businesses to not have these outside services. However, they cannot risk the fines or exposure that using these services could cause them. Not all of these outside services are misclassified, but small businesses do not want to take the chance of being fined or outed publicly as an offender.

On top of everything else, it subjects them to litigation under the Private Attorney General Act and adds another layer of costs to companies already feeling the effects of the current tough economy.

And let’s look at it from the side of the independent contractor. Because of the high unemployment rate, many people over the last three years have turned to outside contracting to make a living. Many of these independent contractors are legitimate business owners with their own corporations who will lose the business of small companies running scared. The effect might even put some of them out of business altogether, putting more of a financial burden on the state and pushing our unemployment rate even higher. California has the second highest unemployment rate in the nation at 11.9 percent and Los Angeles County is even higher at 12.5 percent. What are we trying to do – add more to the ranks of the unemployed?

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