Is Varsity Tutors Pulling Out of California?

California's AB5 Gig Worker bill could change the independent tutoring landscape.

After my post yesterday comparing Varsity Tutors and Wyzant, I had many people from California reach out to me saying that Varsity Tutors wasn’t letting them create an account. This was something I’d heard from a few tutors since I started Tutor Scale, so I decided to take a look for myself, and sure enough, here’s the message I get when I try to put in my Los Angeles zip code:

Thinking that it might just be that there are too many tutors in Los Angeles, I tried several other zip codes throughout the state (including very rural areas) and got the same message.

Next I took a look at the other 49 states. Here’s the 9 states that Varsity Tutors will not let new tutors sign up from:

• Alaska

• California

• Delaware

• Hawaii

• Maine

• New Hampshire

• North Dakota

• Vermont

• West Virginia

When you sort this list by population ranking, California sticks out like a sore thumb:

• California (1st)

• West Virginia (38th)

• Hawaii (40th)

• New Hampshire (41st)

• Maine (42nd)

• Delaware (45th)

• North Dakota (47th)

• Alaska (48th)

• Vermont (49th)

This begs the question: why is Varsity Tutors not accepting new tutor applications from tutors living in the most populous state in the country? There’s only 1 explanation that makes sense to me…

California’s AB5 “Gig Worker” bill makes it much harder for businesses to classify workers as independent contractors

Passed into law in September 2019, the bill codifies into law the California Supreme court’s decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles (2018). The bill says that workers in California are to be classified as employees unless all 3 of the following criteria are met:

1. The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact.

2. The worker performs work that is outside the usual course of the hiring entity's business.

3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

Now, let’s imagine Varsity Tutors listed California accountants on their website that were available to help tutors manage their finances and pay taxes (and not tutor them in accounting). As long as Varsity did not train those accountants or dictate how they interacted with tutors, they could classify them as independent contractors under AB5 since accounting services are not the “usual course” of Varsity’s business, and those accountants are “customarily engaged in an independently established trade,” doing the same work they’re doing for Varsity.

It’s condition #2 that creates challenges for gig economy companies like Varsity. Driving cars is Uber’s business, so it’s hard to say that a driver is “performing work that is outside the usual course of” Uber’s business. Same thing for tutoring companies: tutoring is Varsity’s business. They can’t act like their tutors are performing a service that is disconnected from how they make money. They only make money through the work of their tutors.

Why does Varsity claim say they are not allowing California tutors to sign up?

I asked them! They have a recruitment phone number that you can text, and here’s the response I got back:

Hmm..OK, a bit of a non-response. So I gave them a call. The woman I spoke to was very nice, and at first her response to my question was essentially: Yes, AB5 caused Varsity to stop accepting applications from tutors in California.

When I started asking more specific questions, she backtracked a bit, saying that she wasn’t sure that AB5 led to the change, instead saying that “Our licenses do not allow us to contract with tutors in California.”

However, this explanation doesn’t make sense, considering there are still plenty of existing California tutors that are tutoring on Varsity right now:

I pointed this out to her and asked, “If your license won’t allow you to contract with tutors in California, how are there California tutors listed on your website right now?”

At this point she seemed less and less confident in her answers, and ultimately just defaulted back to: our license doesn’t allow us to contract with tutors in California.

I asked for someone else I could speak with and was given a generic recruitment@varsitytutors.com email address. I reached out with my questions and will update everyone here once I hear back.

What this means for independent tutors

There are basically three options for how the major tutoring marketplaces proceed from here:

1. Reclassify their California tutors as employees, ensuring they all make the minimum wage, are reimbursed for expenses, and that they receive all other benefits afforded to employees under California state law.

2. Continue to classify tutors as independent contractors, and lobby to fight AB5.

3. Pull out of California.

Regardless of what Varsity Tutors and Wyzant do, major gig economy companies are going full steam ahead with option #2. Uber, Lyft, and Doordash have pledged to each spend at least $30 million in 2020 on a ballot initiative to reverse AB5. They’re currently ignoring the law entirely, after being denied an exemption.

If it turns out that Varsity Tutors is pulling out of California because of AB5, it’s a shameful move on their part. The idea that a company that keeps 60-70% of what they bill out can’t afford to pay for benefits for California employees (or pass that cost on to consumers) is a joke.

While they’ve only stopped accepting applications from California so far, as we’ve seen before, California’s legislative decisions tend to be replicated by other states. Already, similar bills are moving forward in Illinois and New York, which means more states will follow from there. This could have major ramifications on the entire tutoring industry.

Stay tuned for more on this soon!