California IC Bill Could Mean Loss in Advisor Jobs

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California may see a serious loss in travel advisor jobs—that is, if a new bill, known as AB 5, passes. The bill would change how independent contractors across a myriad of industries—including travel—are defined, rather converting a vast majority of those ICs into employees. AB 5 has already passed through the State Assembly and will now move onto the State Senate before potentially being signed into law by the Governor.

Robin Sanchez, chief operating officer, Montecito Village Travel, tells us she’s not sure how many of the roughly 250 ICs that operate under Montecito Village Travel the agency would be able to convert into employees if required by the state. And every host agency in the state would be faced with this decision.

“I think jobs would just be lost in California, to be honest,” Sanchez says, adding she isn’t sure how Montecito Village Travel would move forward if the bill were passed.

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To bring on the ICs as employees, Sanchez says Montecito Village Travel would probably see a 10 to 12 percent increase in payroll taxes. It would also affect how the ICs file their own taxes, which would mean they would pull in less money with the new structure than they would if they remained an IC. “So, less money goes back into the economy in California,” Sanchez adds.

Those increase in taxes would also negatively affect the clients: Agencies would have to raise fees to offset the costs of the employees. And if ICs or full agencies are put out of business, it would also create less competition among travel sellers, meaning they could further inflate fees on the consumer end.

Jeff DalPoggetto of Travelwize agreed, saying, “I don't think most of the agencies—certainly not the bigger agencies—are going to offer employee arrangement, except perhaps their biggest producers," signifying that many ICs may be out of business if the bill passes.

However, several people we spoke with said even if this were the case (that agencies would bring on any of/its top ICs), that these advisors would want to operate under the employee model. As an IC, they can set their own hours and fees and work with the clients and brands they choose to; their whole business model would change. Advisors who aren't offered employee status would then be facing all of the costs of starting their own agency, as well as the loss of the tools and benefits provided by their host agency and and travel agency network it was affiliated with.

Regarding the bill, Travel Leaders Group CEO Ninan Chacko said in a statement to Luxury Travel Advisor, “Travel Leaders Group supports the work of the California Coalition of Travel Organizations to clarify that independent sellers of travel should continue to be exempted so they can conduct business as they always have. Our focus is on those efforts and we are not anticipating a different outcome." 

Chacko added: “Since the inception of the California Seller of Travel Law 25 years ago, California’s consumer protection law has acknowledged independent advisors, who are primarily women and small business owners, as an integral part of the travel industry.”

In another statement, Cheryl Cheney Bunker, vice president, U.S. and Canada, Virtuoso Global Member Partnerships, said: “Virtuoso is serving on the board of the California Coalition of Travel Organizations, which has been opposing this, and actively partnering with the American Society of Travel Advisors, our travel agency members and other interested parties in the travel industry. We strongly encourage our California members and partners to voice their opposition to their lawmakers and know many have already done so. The IC model has existed in the travel industry for decades and in recent years has become even more prominent. Virtuoso very much wants to see this legislation amended to protect the thousands of small travel businesses that rely on this model.”

Sanchez adds that she's requesting that all advisors reach out to their legislator and write letters to fight the bill. 

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