California aims to rein in tech’s gig platforms
New law seeks to compel firms like Uber, Lyft to treat workers as employees
A new law in California seeks to rewrite the rules of work and what it means to be an employee.
Known informally as the gig economy bill, or AB5, the legislation went into effect on Jan. 1, seeking to compel all companies — but notably those in tech such as Lyft and Uber — to treat more of their workers like employees.
The law represents a cataclysmic shift for workers who depend on apps to get gigs, and has already inspired similar efforts in influential states like New York, New Jersey and Illinois. Heavyweight presidential candidates like Elizabeth Warren and Bernie Sanders have championed the measure.
But the bill’s passage and implementation, in the face of a strong industry resistance, has done little to quell debate. Instead, the opposition has ramped up, even as the California leaders pledged last week to budget at least $20 million to enforce the law.
Tech companies such as Uber, Lyft, Postmates, DoorDash and Instacart have joined forces — and pocketbooks — to sponsor a $110 million ballot initiative that would formally exempt them from the law. Tech CEOs, business owners, and labour advocates now trade angry opinion articles seemingly every day. Truckers recently won an exemption from it in court.
Newspaper publishers cry foul, saying the provision’s application on delivery drivers could drive them to ruin.
And a small but vocal minority of workers — freelance writers — have been using their platforms to complain that it will kill their livelihood.
AB5 represents one of the most significant attempts to address the ways that technology has upended the nature of work. The bill’s passage was a milestone in an increasingly loud discussion about reigning in some of Silicon Valley’s most vaunted companies, and its outcome could affect the plight of hundreds of thousands of workers for years as it moves to other states. But no one knows whether it will work.
This is how we got here. The roots of the bill go back a few years, when California’s Supreme Court redefined the line between employment and contracting in a decision written for a case filed by a delivery driver.
Charles Lee had sued the courier and delivery company he drove for, Dynamex, which, in 2004, made its drivers become independent contractors. Lee argued that he performed all the same tasks as an employee.
The Supreme Court agreed and set a strict new standard that made it harder for companies to classify workers as independent contractors — a tactic that has been used by companies to cut labour costs for years, advocates say.
The court established a new test, saying workers could be classified as independent contractors only if they were free from the control and direction of the company; engage in work outside the company’s main business; and already work independently from the company, doing the same kinds of thing as the company.
That set the wheels turning in California’s legislature.
“The courts had clearly had enough of these suits,” said Assemblywoman Lorenza Gonzalez, a San Diego Democrat, who wrote the bill. “From that day on we said we’d really like to work on this.”
Being an employee opens the door to a range of protections and benefits that are not available to contractors, including minimum wage, overtime, sick and family leave, unemployment and disability insurance, and workers’ compensation. Contractors can’t formally organize with unions like employees can.
For companies, these benefits cost 20 per cent to 30 per cent more than what they’d pay a contractor doing the same job. And for Uber and Lyft, it could be as high as $500 million and $290 million a year, respectively, according to a Barclays analysis.
California’s new law doesn’t just apply to tech companies. It affects janitors, construction workers, medical technicians, coders, yoga teachers, adultfilm stars, strippers and many others.
The bill was quickly met with criticism from conservative and business groups such as the California Chamber of Commerce after it was introduced in late 2018.
Tech companies whose platforms rely on gig workers, such as Uber, Lyft, Caviar, DoorDash, Handy and Instacart, joined together to oppose the use of the ABC test on their workers, according to the San Francisco Chronicle.
But gig workers organized in informal groups such as Rideshare Drivers United and Gig Workers Rising to support the bill.
Nicole Moore, a part-time Lyft driver and organizer with Ride-share Drivers United, said the proposal tapped into long simmering frustrations about declining and arbitrary pay, as well as a lack of a voice on the job. “There are basic labour standards in this country. It looks like AB5 gets us closer to that.”
After the bill passed the California assembly in June, Uber and Lyft launched a campaign to win over the state Senate and Gov. Gavin Newsom, a Democrat.
Uber chief executive Dara Khosrowshahi and Lyft executives Logan Green and John Zimmer wrote an opinion article published in the Chronicle, arguing that classifying their workers as employees would cause drivers to lose the freedom and flexibility they currently enjoy.
But AB5 passed the legislature and was signed into law by Newsom in September. Labor advocates and many Democrats hailed the new law as a milestone.
“The fact that we were able to get this passed signifies that the legislature and the governor really see the conditions of workers on these platforms and the veneer is wearing off,” Veena Dubal, a law professor at the University of California at San Francisco who studies the gig economy. “People are seeing that these companies are just like any other companies.”
AB5’s implementation is being watched closely elsewhere in the U.S. Other states with Democratic-led legislatures — such as New Jersey, New York and Illinois — have similar bills in the works.
But the chaos of figuring out who’s in and out of the gig economy in California might give some legislators pause.
But tech companies continue to say there are better ways to classify workers.
“Proponents of AB5 came up with a 100-year-old solution to a modern problem,” Stacey Wells, a spokesperson for the tech-funded Coalition to Protect App-Based Drivers and Services. “People rely on this extra income to make ends meet … (they) want to do it only when they want.”
Gonzales dismisses much of the criticism as the clamour of self-interested tech companies sowing confusion about the law.