September 11, 2019; New York Times and Gizmodo
“California legislators approved a landmark bill on Tuesday that requires companies like Uber and Lyft to treat contract workers as employees, a move that could reshape the gig economy,” report Kate Couger and Noam Schreiber in the New York Times.
The bill, Assembly Bill 5, passed by a 29 to 11 vote in the State Senate. Couger and Schreiber add that, “California’s governor, Gavin Newsom, endorsed the bill this month and is expected to sign it after it goes through the State Assembly, in what is expected to be a formality.” (The Assembly approved an earlier version of the bill by a vote of 59 to 15.) The bill, if signed into law, will take effect January 1st and affect over one million workers in the state.
Legislative action had been expected in California ever since last year’s 7-0 California Supreme Court’s Dynamex decision. As NPQ noted at the time, contained within the legalese was a rather simple and straightforward finding—namely, that if something “looks like an employment relationship, it is.”
Specifically, as NPQ’s Karen Kahn notes, the decision created a threefold test that said a worker could be classified as a contractor only if that worker were:
- Free from control of the entity paying his or her wages;
- Doing work that is outside the usual course of business of the employer; and
- Engaged in an independently established business.
Needless to say, a driver taking passengers from place A to place B is operating within the usual scope of business of a ride-hailing company. (Of course, Uber sees it differently; to them, their business is providing a technological platform, which isn’t the job of the drivers, so they won’t need to be reclassified.)
Uber, Lyft, and other ride-hailing services resisted the Court ruling. Earlier this summer, they sought to persuade the state legislature to create an intermediate category for ride-hailing drivers which would fall between independent contractors and employees. Those efforts, however, were rejected. In response, “Uber, Lyft, and DoorDash say they will spend $90 million to pursue this result through a 2020 ballot initiative.
Sign up for our free newsletters
Subscribe to NPQ's newsletters to have our top stories delivered directly to your inbox.
Ride-hailing is not the only industry affected by the new law. Some other contractors who will need to be reclassified as employees include food-delivery couriers, janitors, nail salon technicians, construction workers, and franchise owners. It is notable that the Dynamex case itself involved package delivery workers.
Other states may follow California’s lead. “A coalition of labor groups is pushing similar legislation in New York,” Couger and Schreiber point out. The bill could even have international repercussions. In Great Britain, the country’s Supreme Court is expected to rule on whether ride hailing drivers must be classified as workers next year.
One bill coauthor, former labor leader and Democratic State Senator Maria Elena Durazo, remarked, “Today the so-called gig companies present themselves as the innovative future of tomorrow, a future where companies don’t pay Social Security or Medicare. Let’s be clear: there is nothing innovative about underpaying someone for their labor.” Durazo added, “Today we are determining the future of the California economy.”
Rebecca Stack-Martinez, a driver and an organizer with the group Gig Workers Rising, lauded the bill’s passage. “I am so proud of rideshare drivers who took time out of their lives to share their stories, stand up, speak to legislators and hope they take a moment to bask in a victory.”
Of course, the impact of the bill remains to see. Providing benefits to workers who were formerly contractors will raise labor costs and ride-hailing prices can thus be expected to climb. Less plausibly, Uber and Lyft have claimed that the bill would reduce scheduling flexibility, even though nothing in employment law would require that.
Of course, as employees, ride-hailing drivers might choose to unionize, notes Bryan Menegus in Gizmodo. Menegus writes that, “Unions and workers across the world have been watching California.” Veena Dubal, a law professor at the University of California, Hastings, tells Menegus that she sees this law as a potentially groundbreaking “turning of the tides—the first in many victories in fighting global inequality exacerbated by techno-capital.”—Steve Dubb