We’ll need entrepreneurship and flexibility in the post-COVID economy

We will get through this. The COVID-19 public health emergency will end, and eventually the economy will come back. As a nation, we will come out stronger — as we do after every crisis. 

But, as with other major events, we Americans will be changed. The world may look different on the other side of this pandemic than it did only a few short weeks ago. 

Already, we are adapting to working from home, using remote learning, and having our groceries and other necessities delivered. Other things haven’t changed: Medical professionals, for example, remain on the front lines, protecting us. 

Still, what will work look like in the post-COVID economy, and how should we prepare for the changes that are coming?

There will be several responses to this crisis, which fall into two broad timelines. One involves the immediate response and steps to mitigate the economic and health damage of the virus. The second involves long-term changes in our society. 

The first phase includes working from home where possible, and having companies voluntarily provide benefits for their employees and even their contractors. The New York Times recently reported “[s]ome big companies, like Walmart and Target, have added paid sick leave for coronavirus.”

Amazon stepped up by creating a relief fund with a $25 million initial contribution that will provide grants for up to two weeks of pay for those diagnosed with COVID-19 or placed in quarantine. The fund also will provide personal grants ranging from $400 to $5,000 per person for those facing financial hardship because of the virus. 

While these and other private companies are doing what they can to help, states such as California still have laws on the books that attack freelancing and independent contracting — work that could be a lifeline during quarantine. 

California’s Assembly Bill 5 made it effectively illegal for independent contractors, such as freelance writers who work from home, to earn a living. Even AB5’s author, Assemblywoman Lorena Gonzalez, has realized the bill went too far; in February, she said she would be “rolling out a number of asks, initiatives and bill language to help ease the implementation of AB5.” Her legislation, AB 1850, is still in committee. 

California’s attack on freelancing has harmed many independent contractors whose ability to provide services remotely fits in well with social distancing. Clients who worried about running afoul of the law may have canceled their contracts. This, right before the crisis and subsequent economic downturn that has led to massive unemployment. 

California Gov. Gavin Newsom declared a state of emergency early in March and recently issued a 90- day grace period for mortgage payments and a moratorium on evictions. Social distancing has a direct impact on the virus’s spread and AB5 hampers entrepreneurs’ ability to work from home, not to mention its potential economic impact. Newsom could exercise his emergency authority and suspend any enforcement of AB5 (and possibly suspend the law itself). 

Once we enter the post-COVID economy, working from home and entrepreneurship are likely to continue. Unfortunately, some laws make it harder for companies to provide benefits and training to independent contractors and freelancers. These laws could be changed to allow companies to give training and benefits, if they choose, to independent contractors and small businesses that are not directly in their employment. 

In the case of California, the state should fully repeal AB5 instead of making tweaks and exemptions as Assemblywoman Gonzalez proposes. Other states should reconsider any similar legislation, as should federal officials when they look at bills such as the PRO Act. 

Backing away from AB5 or the PRO Act will not be enough, however. Congress should focus on making freelancing and entrepreneurship easier. 

There are several diverse tests across federal and state laws that determine who is an employee and who is an independent entrepreneur. The Department of Labor, operating under the Fair Labor Standards Act, and the IRS have different criteria. And as noted above, some states such as California have far more strict guidelines that can make independent contracting almost impossible. 

These restrictions need to be relaxed and harmonized. Entrepreneurship and flexibility should be encouraged. 

We still have a need for immediate response to the health and economic safety crisis America faces. But we also should start thinking about the post-coronavirus economy. The time to make necessary changes will be soon after the crisis has ended. 

F. Vincent Vernuccio is a senior fellow at the Mackinac Center for Public Policy, a research and educational institute in Midland, Mich. Follow him on Twitter @vinnievernuccio.