TechnologyCalifornia bill could reset the rules for the gig economy around the country
California is close to reclassifying gig economy workers as employees
The California State Senate has approved Assembly Bill 5, voting 29 to 11 in favor of requiring gig companies like Uber and Lyft to recognize independent contractors as employees. It's not a law just yet -- it has to go through the State Assembly and secure California Governor Gavin Newsom's signature after this -- but it's close to becoming one. The New York Timessays the State Assembly vote is expected to be a mere formality, and Newsom is expected to sign the bill into law, seeing as he endorsed it. If the bill does become a law, it'll go into effect on January 1st.
Big changes are afoot for the gig economy. California's Senate passed a landmark bill on Tuesday night that could make Uber , Lyft , DoorDash, Postmates and other gig economy companies . Gov. Gavin Newsom has said he'll sign it into law.
The prospective law, AB 5, could upend Uber, Lyft and other companies in the field, which have businesses hinged on bringing aboard hundreds of thousands of independent contractors whose labor is far cheaper than that of employees. The setup also benefits the companies by shifting many costs, such as supplying and maintaining vehicles, to the contractors, who also have to pay for their own health care and aren't given benefits, such as sick days or overtime pay.
AB5, Landmark Bill Protecting Gig Workers in California, Becomes Law
The hard-fought bill that may one day give full employee status to workers engaged in the gig economy, spearheaded by companies like Uber, Lyft, and DoorDash, has finally been signed into law by the office of California’s Governor Gavin Newsom. © Photo: Rich Pedroncelli (AP)Assembly Bill 5 (AB5) was introduced by Representative Lorena Gonzalez in January and intended to codify a recent state Supreme Court decision into law.
Uber and Lyft have both said their businesses could be broken if they're required to reclassify their drivers as employees. Treating contractors as employees would bring a new set of costs to the companies, neither of which is profitable. Uber has had in the past six weeks to control its costs.
When Uber, it specifically identified the risk in a filing with the Securities and Exchange Commission. "Our business would be adversely affected if drivers were classified as employees instead of independent contractors," it wrote.
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Two U.S. agencies are preparing to submit for final White House regulatory review a plan to revoke California's authority to set its own vehicle greenhouse gas standards and declare that states are preempted from setting their own vehicle rules, two people briefed on the matter said Thursday. © Eric Thayer /Reuters Traffic moves slowly on the 405 freeway in Los Angeles, California July 14, 2011.
What happens in California rarely stays there. By dint of its size, the Golden State often sets legal and regulatory standards for the country. The state is the largest by both population and, and that size means companies around the world have to meet its often-strict and precedent-setting standards if they want to tap the lucrative market.
In addition to AB 5, the state passed the, which sets standards for collecting information online and goes into effect in January. The state's rules and laws on , emissions and air quality have affected automakers around the world. And the California Assembly just that would allow .
, requiring hosts to be registered with the city.and passed the earliest laws in the US curbing the use of facial recognition technology, and San Francisco was among the first cities to curb
Uber and Lyft prepare $60 million fight against worker classification bill
The fight over whether rideshare drivers should be classified as employees and therefore be eligible for benefits continues. The latest battleground is California, where a worker classification bill is currently being debated by lawmakers. Uber and Lyft say that classifying their drivers as employees and not independent contractors would endanger their businesses, and have threatened to spend a combined $60 million on a ballot measure to exempt them from the bill.
Many ride-hail drivers see California's AB 5 as a first step to broader oversight of the gig economy. Already New York City ensures drivers earn at least $17.22 per hour for each trip they make and has put limits on. Washington state and Oregon have .
In California, thousands of drivers across the state rallied to whip up support for AB 5 as it made its way through the legislature. They protested in front of Uber's San Francisco headquarters and organized a caravan from Los Angeles to Sacramento. Many met with lawmakers to push for the bill.
"AB 5 is only the beginning," according to Edan Alva, a ride-hail driver who says the momentum for change is building. "Just because someone really needs to work does not mean that their rights as a worker should be stepped all over."
Uber and Lyft have said the majority of their drivers don't want to be employees, a status that would change the relationship between the companies and the workers. The companies have said that if they couldn't strike a deal on AB 5, they'd take the issue to California voters by sponsoring a ballot initiative in November 2020 that would exempt them from the law. Along with DoorDash, Uber and Lyft have said they'd spend $30 million each to sponsor the initiative.
"We are fully prepared to take this issue to the voters of California to preserve the freedom and access drivers and riders want and need," Adrian Durbin, a Lyft spokesman, said in an emailed statement.
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