San Francisco Chronicle

Assembly OKs bill on gig-work rules

Legislatio­n lays out 3-part criteria for contractor status

- By Carolyn Said

The Assembly on Wednesday passed “gig work” legislatio­n that could send seismic changes across California’s employment landscape if passed by the Senate and signed by the governor.

Hundreds of thousands of independen­t contractor­s, ranging from Uber and Lyft drivers to manicurist­s, could become employees under AB5, which codifies a groundbrea­king California Supreme Court decision known as Dynamex.

The court decision and the bill both apply three-part criteria, called the ABC test, to determine whether a worker is an employee. To be a

true independen­t contractor, it says, a worker must be free from a company’s control, doing work not central to the company’s business, and have an independen­t business in that trade.

The bill’s author, Assemblywo­man Lorena Gonzalez, D-San Diego, said that companies often classify workers as independen­t contractor­s to duck laws governing minimum wage, overtime, workers’ comp, disability and other benefits. Many experts say reclassify­ing workers as employees can add 30% to a company’s labor expenses.

AB5 “will give certainty to the businesses of California, give certainty to the workers, certainty to the taxpayers,” Gonzalez said on the Assembly floor.

“This is a monumental victory for California’s working people,” said Steve Smith, a spokesman for the California Labor Federation. Organized labor strongly backed the bill, which has the potential to create new classes of employees who could become union members. “This sets a standard that allows California workers to succeed and to enjoy the basic protection­s all workers should have.”

But many businesses large and small said the bill would devastate them, and some independen­t contractor­s said they feared loss of the flexibilit­y that is key to their lives.

“Small businesses rely heavily on third-party providers because they don’t have the wherewitha­l in many cases” to hire employees for some tasks, said Jack Frost, president of Pro-Small Biz California. “Independen­t contractor­s help create efficienci­es and a profitable bottom line.”

The bill passed 53-11. But even many of its supporters said they felt it needed revisions before going through the Senate, notably exempting more profession­s and industries, as well as small businesses, from its provisions.

So far, the bill exempts doctors, dentists, lawyers, architects, accountant­s, engineers, insurance agents, investment advisers, direct sellers, real estate agents, hairstylis­ts and barbers who rent booths at salons, as well as marketers and human-resources profession­als with advanced degrees.

But the California Chamber of Commerce and the I’m Independen­t Coalition of businesses seek a lengthy list of further exemptions, including ones for short-term projects, business-to-business contracts, and people who like to control their own schedules, such as Uber/Lyft drivers, newspaper distributo­rs, taxi drivers, truck drivers, consultant­s, travel agents, caterers, freelance writers, graphic designers and more.

Language translator­s would be hit particular­ly hard, said Naomi Bowman, president of DS-Interpreta­tion, a South San Francisco firm that provides interprete­rs for conference­s and other events.

“Such workers are not mere ‘side-gig’ workers in a new economy but true, profession­al, highly-skilled independen­t contractor­s who operate independen­t businesses with dozens or hundreds of clients,” she said in an email. “They want to and should be allowed to remain independen­t contractor­s.”

Otherwise, she said, language interpreti­ng will be outsourced to other states or countries.

Although at least 2 million California­ns work as independen­t contractor­s, much attention has focused on Uber/Lyft drivers. Many drivers and their companies say they fear losing flexibilit­y.

“Lyft drivers overwhelmi­ngly prefer the freedom of working where, when, and how much they want,” Lyft said in a statement. “Many are moms, students, seniors or veterans and 75 percent of them drive less than 10 hours a week.”

While Lyft said AB5 “would force ridesharin­g drivers into shift work, eliminatin­g the control drivers currently have over their own schedules,” backers of the legislatio­n disagreed.

“There is nothing in the law or the bill that says they cannot provide the exact same flexibilit­y they do now,” said Smith from the California Labor Federation. “Drivers could still go on the app and decide when to drive. Nothing would preclude Uber (or Lyft) from allowing that to happen.”

Edward Escobar, a San Francisco Lyft/Uber driver who also works with the Alliance for Independen­t Workers, an organizing movement for drivers and others, said he and many other drivers are fine remaining contractor­s as long as they truly are independen­t.

“An electricia­n or plumber sets their own rates, terms and conditions,” he said. “That’s what we want. Uber and Lyft have done a bait and switch; they are underminin­g what it means to be an independen­t contractor.”

The bill’s economic impact is still under debate.

On one hand, Gonzalez said, California “loses upwards of $8 billion a year because of lost wages, lost taxes and expenses as a state when companies misclassif­y workers,” noting that taxpayers subsidize social-safety net assistance for misclassif­ied workers.

On the other hand, businesses said they’d be forced to pass along higher costs to customers.

“That’s the argument they use for any worker protection, whether minimum wage or sick days,” Smith said. “In practice, this has potential to have a really positive economic impact on both consumer spending and public services. There’s a clear benefit to increasing the buying power of workers by ensuring they get paid a fair wage. “

Also up in the air is how reclassifi­cation might actually occur if the bill becomes law. Many gig workers have agreed to handle disputes through arbitratio­n, which precludes them from filing class-action lawsuits. A California agency such as the Labor Commission­er’s Office might need to step in.

 ?? Gabrielle Lurie / The Chronicle ?? A man hops into a Lyft car outside the Caltrain station in S.F. The driver could become an employee if AB5 becomes law.
Gabrielle Lurie / The Chronicle A man hops into a Lyft car outside the Caltrain station in S.F. The driver could become an employee if AB5 becomes law.
 ?? Irfan Khan / Los Angeles Times ?? Kristyn Hansen, at Stews Barber Shop in Ladera Ranch (Orange County), would remain an independen­t contractor under the Assembly legislatio­n only if she rents a booth in the shop.
Irfan Khan / Los Angeles Times Kristyn Hansen, at Stews Barber Shop in Ladera Ranch (Orange County), would remain an independen­t contractor under the Assembly legislatio­n only if she rents a booth in the shop.

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