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Is California Employment Development Dept. breaking AB5 law with Deloitte?

Written By | May 28, 2020
AB5, Deloitte, Independent Contractors, California, Gonzalez

LOS ANGELES: LOS ANGELES: KCRA 3 in Sacramento has kicked over a hornet’s nest.

On May 26 they reported that the California Employment Development Department (CA_EDD) signed a no-bid contract with Deloitte to staff its expanded call center to manage the claims filing overload from the COVID-19 pandemic.

“Two weeks ago, KCRA 3 spoke with unemployment applicants who said the call center was answered by people in other states. One even said the person on the phone didn’t know how California’s unemployment payments were made.
“Now, records obtained by KCRA 3 show that EDD agreed to pay more than $11 million to Deloitte Consulting to hire those employees. The contract started in April and goes through June.
“Deloitte is supposed to supply 500 call center employees. All call center operators are supposed to be trained using EDD materials.”

The original headline said, Independent Contractors, which immediately put it on the radar of anti-AB5 activists. After all, CA_EDD is tasked with enforcing AB5, which made independent contracting illegal.

Assemblywoman Lorena Gonzalez – no friend to California Women and Minorities

Assemblywoman Lorena Gonzalez, the sponsor and staunch advocate of the law was immediately questioned on her personal Twitter account.

Asm. Gonzalez’s first response was that it was being looked into. She quickly responded again:

Mistake. But is it?

California’s AB5 destroys women, minorities Gonzalez claims to champion

Deloitte’s entire business model is built around independent contractors. They have instituted a cloud-based technology called Curasion to facilitate hiring for their clients:

Curasion is a cloud-based platform for engaging independent contractors built for the Fortune 500 level organization. It gives employers a direct channel to top-tier, in-demand independent contractor professionals. Best of all, Curasion matches every new job requirement to the skills, experience, and availability of potential candidates, making it easier than ever to hire contractors directly and hit the ground running on new projects.”

This technology is not unlike Uber, Lyft, and DoorDash’s use of an app to facilitate their independent contractors. So how are these “Deloitte representatives” employees?

More activists weighed in on the matter, debunking Asm. Gonzalez’s insistence that these 500 “representatives” are independent contractors and not employees, and outlining her own law for her.

Once again, Asm. Gonzalez put on her shocked face.

This apt reply from Kira Davis, Editor-at-Large for Redstate brought the point fully home:

Michael Alfera of the People v. AB5 Facebook Group, and a musician and attorney, posted the KCRA 3 article on the group’s page with these words:

“In so doing, the EDD has violated AB5; its contract with Deloitte does not pass the ABC test, and no exemption applies. Why is the state allowed to engage in business practices while simultaneously assessing penalties against private businesses for engaging in the very same practices?”

Why indeed?

Deloitte has a 10-year history with the state of California, and not a positive one. The’s article “Deloitte Gets No-Bid Contract To Improve California’s Unemployment System Despite Criticism Over Previous Work” said that, “In 2010, the department awarded Deloitte a contract to overhaul its unemployment benefits system. The project ballooned to $110 million — nearly twice the original estimate from the state.

“Then, hundreds of thousands of claims were held up by issues with the system’s new software, according to reporting by the Los Angeles Times.
“As a result, state lawmakers hauled in EDD and Deloitte officials to answer questions on the fumbled project.
“Around the same time, Deloitte was tasked with updating the EDD’s system for handling disability insurance claims. That project came in at $158 million, which was $123 million over the project’s original estimate, according to The Orange County Register.”

Asm. Gonzalez’s feigned ignorance is also suspect. Asm. Gonzalez was quoted in a 2014 Los Angeles Times article about a whistle-blower who warned his CA_EDD bosses about glitches in the Deloitte software upgrade. He was ignored, and fired:

“The EDD has a ‘cultural problem that folks at the top aren’t listening to employees below them,’ said Assemblywoman Lorena Gonzalez (D-San Diego), who has been critical of the agency’s botched information technology efforts.”

Really? So as head of both appropriations and employment and labor committees, why did you allow CA_EDD to sign a no-bid contract with the same company that has saddled the state with crappy technology?

Dubal and AB5: A Woman of Privilege dictating how Californians can work

Alfera challenged Asm. Gonzalez on Twitter, and was not finished with his breakdown of how this contract is illegal under AB5:


The hornets are circling and prepared to sting.

California’s unemployment rate nearly tripled to 15.5 percent in April. More than 5 million Californians have filed for unemployment benefits since the shelter-in-place orders in March.

AB5 keeps translators and interpreters from the fight against COVID-19

Many of those claims remain unanswered and unpaid because of the out-of-date technology that Deloitte played a huge part in implementing. Californians are spending hours, and sometimes days on the phone trying to contact the EDD to no avail:

So if Deloitte has hired independent contractors to fulfill work that Californians cannot do because AB5 has outlawed independent contracting from the state, it says several things:

1). It legitimatizes the need and role of the independent contractor model, a model that California seeks to destroy through AB5.
2) The CA_EDD is grossly negligent. First, in contracting with a company that is part of the reason they have their current issues; Second, by breaking the very law they have budgeted 20 million to enforce.

How in God’s name would California independent contractors and freelancers who have had their professions ripped from them under AB5 not be insulted by this?

In a reply post on the People v. AB5 page, Alfera shared an email response he sent to several California State Senators, showing how AB5 is being violated, and calling for the CA_EDD’s contractual relationship with Deloitte to be investigated:

“I‘d like to briefly point out how the EDD is in fact violating AB 5 by hiring call center representatives through Deloitte, even if the reps are brought on as employees.
AB5 mandates that all contracts where money is being exchanged for California labor or services must be employment contracts unless the business relationship passes the ABC test. The contract between EDD and Deloitte fails the ABC test spectacularly because the call center reps are doing work that is in the ordinary course of business of the EDD.
Therefore, the EDD (not Deloitte) must bring these individuals on as employees, unless an exemption applies. Here, the business-to-business exemption does not apply because the representatives are providing services directly to the customers rather than to the EDD itself. No other exemption applies to this situation.
I believe that the possibility that the EDD has violated the very law it is tasked with enforcing calls for the appointment of an outside investigator.”

A hornet’s nest has been kicked all right, and they are the murder hornets. California’s unemployed, independent contractors, and freelancers want answers beyond tweets and promise to “meet the moment”.


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Jennifer Oliver OConnell

Jennifer Oliver OConnell offers witty, insightful, and direct opinion, analysis and musings on local and national politics and popular culture, with occasional detours into reinvention, food, and Yoga. Jennifer also teaches Yoga, and coaches clients on careers and reinvention. You can keep up with what's in Jennifer's orbit through her As the Girl Turns website.