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California Passes Landmark Bill to Make Gig Economy



SACRAMENTO – California lawmakers approved a bill Tuesday that would require companies like Uber and Lyft to treat contract workers as employees, a move that could reshape the gig economy and adds fuel to a long discussion about whether the nature of the work is having

The bill passed with a 29 to 11 vote in the State Senate and would apply to app-based companies, despite their efforts to negotiate an exception. California governor, Gavin Newsom, has endorsed the bill this month and is expected to sign it. Under the measure, effective January 1, workers should be designated as employees rather than contractors if a company exercises control over how they perform their tasks or if their work is part of the regular business of a company.

The law will affect at least one million California workers who have ended the decade-long trend of outsourcing and franchising work, making employer-worker relations longer in the arm. Many people are pushed into contractor status without access to basic protections such as a minimum wage and unemployment insurance. Rider drivers, food delivery couriers, janitors, nail salon workers, construction workers and franchise owners can all be reclassified as employees. Riding hailing firms – including app-based services offering food delivery, home repair and dog walking services – have built their businesses on cheap, independent labor. Uber and Lyft, which has hundreds of thousands of drivers in California, says contract work gives people flexibility. They warned that identifying drivers as employees could ruin their businesses.

The bill, which enacts and extends a 2018 California Supreme Court, may influence other states. A coalition of labor groups is pushing for similar legislation in New York, and bills in Washington State and Oregon that are similar to California but have failed to move can see renewed momentum. New York City passed a minimum wage for ride-hailing drivers last year but did not try to make them employees.

"This will lead to major recovery across the country," said David Weil, a top Labor Department official during the Obama administration and the author of a book on workplace fissuring. He argued the bill could set a new bar for worker protections and force business owners to rethink their reliance on contractors.

"This is particularly critical because of its impact on the development of other business models," Mr. Weil said.

California lawmakers said the bill, known as Assembly Bill 5 and proposed by State Assemblywoman Lorena Gonzalez, a Democrat, would set the tone for the future of the job.

"Today the so-called gig companies are in. Themselves as the future of tomorrow, a future where companies don't pay Social Security or Medicare," said State Senator Maria Elena Durazo, a Democrat. "It's pretty clear: there is nothing innovative about tormenting someone for their work."

He added, "Now we are determining the future of California's economy."

Rubber-type work has been under the spotlight for years as companies like Uber, Lyft and DoorDash in the United States – as well as Didi Chuxing in China and Ola in India – have grown into behemoths even the contractors they trusted did not receive the benefits of or minimum pay guaranteed to employees. Many companies work hard to defeat efforts to differentiate their workers as employees, adjusting class action actions from drivers and securing proposals from rules that may. threatening the freelancer status of the drivers.

While regulators in California and at least three other states – New York, Alaska and Oregon – found that aboard drivers were employees under state laws for narrow purposes, such as eligibility for unemployment insurance, these findings may be replaced by state laws that explicitly treat drivers as contractors. About half of the states in the country have passed such provisions.

But more recently, the tide began to change. Two federal proposals have been introduced since 2018 that seek to define the way workers are classified to allow many of them to unite. Those proposals have received support from candidates for the Democratic presidential nominee, including Senators Kamala Harris, Bernie Sanders and Elizabeth Warren. The president's hopes also shape California's bill.

In Britain, Uber appealed a ruling by a labor tribunal that drivers should be classified as workers entitled to minimum wage and leave. The country's Supreme Court is expected to hear arguments in the case next year.

"Certain types of benefits to certain populations of drivers seem inevitable," said Lloyd Walmsley, an equity research analyst at Deutsche Bank who follows the ride industry. .

A critical question is how economic companies react to the new California law. Industry officials estimate that having to rely on employees rather than contractors raises costs by 20 to 30 percent.

Uber and Lyft have repeatedly warned that they will need to start scheduling drivers if they are employees, reducing drivers' ability to operate when and where they want.

Experts say there is nothing in the bill that requires employees to work off-road sets, and that Uber and Lyft are legally entitled to continue allowing drivers to make their own cars. scheduling decision.

In practice, Uber and Lyft may choose to limit the number of drivers who can work in slow hours or in less busy markets, where drivers may not generate enough fares to justify their payroll costs as employees. That could lead to a reduced demand for drivers at all.

But Veena Dubal, a professor at the University of California Hastings College of the Law, said it would still be beneficial for Uber and Lyft to rely on incentives like bonus pay to make sure they have enough drivers on the road to meet customer demand more than if they had scheduled drivers in advance.

"It does not make sense to them" to restrict flexibility, he said.

Some of the companies were not done fighting the bill. Uber, Lyft and DoorDash pledged to spend $ 90 million to support a ballot initiative that would essentially allow them from law. Uber also said the claims would appear to misrepresent drivers from arbitration and press lawmakers to consider a separate bill that could free them from A.B. The effect is 5 when the legislative session begins in January.

The cities of California will have the means to implement the new law. In the last minute amendments to the bill, lawmakers gave big cities the right to sue companies that didn't comply.

The bill is not supported by drivers. Some objected to this because they were concerned that it would be difficult to create a flexible schedule. After Uber and Lyft sent messages to drivers and riders in California in August asking them to contact lawmakers on behalf of the companies, legislative aides said they had noticed a phone call.

Such as repeal of the bill. airline companies have sought an agreement that will create a new category of workers between contractors and employees. They met with Governor Newsom's labor groups and offices to negotiate a deal to give drivers a minimum wage and the right to adjust, while stopping short of classifying them as employees. deal with insanity. Some company officials have expressed cautious optimism in recent days about striking a labor deal after passing the bill.


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