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Melissa Varela, president and CEO of San Ramon, Calif.-based Modern Romance Travel, is just one of about 11,000 travel advisors in California. She is also just one of thousands of industry professionals who, beginning Jan. 1, 2020, may be noncompliant to the law if California’s Assembly Bill 5 (AB 5) passes in its current form.
Under AB 5, California-based workers in all industries will need to meet strict criteria to be classified as an independent contractor (IC). However, if any of their ICs sell travel, host agencies that also sell travel will fail to meet AB 5’s second criterion: “The worker performs work that is outside the usual course of the hiring entity’s business.”
Now, Varela — who works with two ICs — has joined the American Society of Travel Advisors (ASTA), the California Coalition of Travel Organizations and her industry peers in the fight for a travel agency exemption to AB 5.
Here’s what she wants affected travel advisors to know about this landmark law.
Why do you believe AB 5 will have a negative effect on the travel industry as a whole?The IC model has existed in our industry for decades, and it provides many opportunities for a small business owner like myself. If AB 5 passes, and a travel agency is forced to convert its travel-selling ICs into employees with W-2 status, the overall expenses for the agency will rise due to higher labor costs, payroll taxes, overtime and other mandatory benefits that must be given to these new employees. Many agencies are small businesses and do not have the budget for these added expense.
Additionally, our ICs play an extremely important role on our team and in our overall business. This will harm them, too. ASTA has reported that 41% of ICs could leave the industry or their home state for a different one if it will allow them the flexibility and freedom they previously enjoyed as an IC.
How will the passing of AB 5 affect the way you personally do business?This has been keeping me up at night, because this is going to affect so many people. I don’t think a lot of ICs or agency owners understand how it will affect their business and their job. At Modern Romance Travel, we may convert our ICs to W-2 status employees, or create a separate entity to continue to engage with our ICs because, under the new law, the IC cannot have the same job (i.e., selling travel) as the host agency. These are both choices that ASTA has identified as scenario-planning options for affected agencies.
Speaking of ASTA, the association recently held a webinar on the topic, which you attended. What did you find most surprising?I was surprised to hear that the likelihood of the bill passing is projected to be between 85 and 90%. The most helpful part of the webinar was reviewing the five potential options that ASTA put together to help agencies prepare for the bill passing. (Note: The recorded webinar is available online to ASTA members for free.)
How can Californians make their voice heard?If you are someone who sells travel in California or employs California-based ICs, reach out to your local senator to fight for an amendment to the bill that would exempt travel agencies from this new law. I suggest advisors go to ASTA’s Grassroots Portal, where there is a phone script and an email template that takes two minutes to fill out. And then, make that phone call — ASTA provides you with all the talking points that you will need.
After attending ASTA’s webinar, I also signed up to become an ASTA member. The organization is helping out and giving us good direction, so it’s really important to support it.
Also, I’d suggest reading some articles about AB 5 online just to understand the background of what’s happening. Advisors should also start thinking about planning ahead for their business. If this bill does pass — and it probably will, from what we are hearing — you should know what your potential options are.
Will this law affect workers who don’t live in California?If you don’t live in California but you are an IC or a host agency in another state, you should be watching this very carefully. Some other states may follow what California does, so it’s important to understand what’s happening. That way, you can plan ahead, too.
The DetailsASTA's Grassroots Portalwww.asta.org