Uber and Lyft drivers mandated to become full employees under new California law

Wesley Brown, Staff Writer

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California Governor Gavin Newsom signed a new law which compels companies like Uber and Lyft to classify their workers as official employees, effectively providing guaranteed minimum wage and health benefits. The controversial law will be enforced starting on Jan. 1, 2020.

Assembly Bill 5, introduced by Assemblywoman Lorena Gonzalez (D-San Diego), dictates that workers can only be considered independent contractors if their work is outside their company’s normal business. This effectively forces workers of the gig economy into employment positions. 

If these companies are unable or unwilling to employ workers fully, then the law could result in the loss of work for many independent contractors. Essentially, this law will upend the business models of companies that rely on independent contractors, potentially changing how the whole state of California uses services like Uber, Lyft, and Doordash.

AB 5 has become a hotly contested law among workers, companies, and the legislators who passed it. Intense lobbying is expected to continue through to next year as many companies vie for exemption from the law. Many app-based tech companies have unsuccessfully negotiated with union leaders to try and provide workers with new perks without reclassifying them as employees. 

According to Uber’s chief legal officer, Tony West, “We’ve engaged in good faith with the Legislature, the Newsom administration and labor leaders for nearly a year on this issue… we believe California is missing a real opportunity to lead the nation by improving the quality, security and dignity of independent work.”

The law will be enforced by what is called an “ABC test,” which will determine whether workers for a particular company can be considered independent contractors. Uber hopes to pass these tests by claiming their status as a tech company, not a transportation provider. If this explanation were accepted it would mean that Uber drivers do not actually fall within Uber’s normal business parameters and therefore could not be considered employees.

Governor Newsom says regarding the bill that “A next step is creating pathways for more workers to form a union, collectively bargain to earn more, and have a stronger voice at work—all while preserving flexibility and innovation.”

Some other industries have successfully negotiated exemptions from this law, including real estate, commercial fishing, and cosmetology services. Companies which rely on the independence and fluidity of their workers’ schedules and opportunities are not covered by these exemptions. 

Gig economy jobs are known by many for their ease of entry for workers. Since this aspect of the gig economy is now threatened by mandated employment, the question being asked by many is: “how will the worker’s jobs be affected?”

Many truck drivers who contract themselves and their equipment out to other companies have raised their own concerns over job security in the years to come. According to truck owner-operator Jylki Sarup, “I’d rather be an independent worker because I have more flexible hours. I’ve been working for more than four years in the industry and it’s been going well for me and my family.”

These concerns are shared by the owners of trucking companies who employ these independent contractors. According to Greg Menna, owner of Greg’s Trucking Inc., “It will probably put me out of business within six months of that law being passed.” 

Uber, Lyft, and Doordash have each committed $30 million dollars to promote a referendum on the law in the 2020 ballet. If the legislators and industries can’t agree on a compromise, perhaps the people will have to decide.

According to the Bureau of Labor Statistics, 55 million people were part of the gig economy in 2017, over 35 percent of the US workforce. That number is expected to rise to 43 percent by the year 2020. Under AB 5 the gig economy could undergo potentially volatile changes, affecting both the workers and the companies which employ them. Whether these changes will have a negative or positive outcome is yet to be seen.