New York Gov. Andrew Cuomo signaled his state could take a page out of California's playbook by regulating the gig economy during his "State of the State" address on Wednesday.
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"Today's economy works brilliantly for innovators, shareholders, and billionaires, but it abuses workers," the Democrat said according to prepared remarks provided by his office. "This year more than 40 percent of the workforce will be in jobs related to the new gig economy — an economy which has spurred growth and many innovations, but which excludes many workers from the progress of fair pay and benefits."
Cuomo's support for regulations on gig workers, and the companies that rely on them, comes after California's Assembly Bill 5 went into effect on Jan. 1. New York lawmakers have proposed similar legislation, and Cuomo has appeared to resist piling regulations on companies like Uber, until now.
"Too many corporations are increasing their profits at the expense of the employee and the taxpayer. That must end," he said. "A driver is not an independent contractor simply because she drives her own car on the job."
Groups including Uber drivers, truckers and freelance writers are fighting the regulation that Democratic California Gov. Gavin Newsom signed in September. AB5, sponsored by Assemblywoman Lorena Gonzalez, would require many businesses to treat their gig workers as employees. It even caps the number of articles that freelance journalists can be paid for.
"I think that New York should be looking at what’s happening in California seeing it as a warning sign," Heritage Foundation economics research fellow Rachel Greszler told FOX Business. "You end up hurting the people you're trying to help."
For example, freelance writers in California are grappling with rejection letters — and decisions by sites like SB Nation to drop about 200 contractors — as part of the fallout from AB5.
"It's Christmas Eve Lorena Gonzalez," writer Jenna Busch wrote on Twitter last month. "Hope you're spending it with your family. Because of #AB5, I'm spending mine applying for jobs outside my field so I can pay my rent. Hope you're dreaming of sugar plums. I'm having nightmares about my future."
Entrepreneur John Chuang, an advocate of AB5, told FOX Business that AB5 is disruptive but worth it. Legislation is needed to "address the ambiguity in New York labor laws when it comes to classifying W-2 employees and independent contractors," Chuang told FOX Business.
"The gig economy currently has an unfair advantage over all other businesses that pay employer payroll taxes and provide benefits," Chuang said. "Enacting this law would level the playing field for all workers and enable companies to provide benefits to attract and retain the best talent."
Some companies are being forced to come up with creative solutions to maintain their relationships with California workers. Maverick Trading announced on Thursday that it will be able to keep working with California traders as long as they trade through their own corporations or LLCs.
"For a brief moment, we were presented with a decision whether or not to release our existing California-based traders as well as to discontinue accepting new California traders," the firm said in a press release. "Our traders are the firm's greatest assets and we refused to believe that the only option was to cast out a segment of our traders simply because of where they lived."
Greszler said AB5 has the potential to drive people out of California — and similar legislation could do the same in New York. California is on track to lose a seat in Congress for the first time in history.
"You're seeing people vote with their feet," Greszler said.