AB 5, a groundbreaking labor bill that would expand job benefits and pay guarantees to thousands of workers formerly classified as independent contractors, cleared the state Senate and Assembly on Wednesday and will now move on to the desk of Governor Gavin Newsom, who is expected to sign it.
If signed, the controversial legislation, which is based on a 2018 Supreme Court ruling, will implement far stricter standards for determining employment status in California, altering business-worker relationships in a wide range of industries from gig economy apps and rideshare to trucking to adult entertainment.
In recent months a number of “gig economy” apps, which rely heavily on independent contractors, have sought to gain exemption from the bill, with Uber, Lyft, and DoorDash alone funneling a combined $90 million into a ballot initiative that would protect them from the new classifications. In a joint op-ed for the San Francisco Chronicle in June, Uber chief executive Dara Khosrowshahi and Lyft cofounders Logan Green and John Zimmer argued that the bill would prevent drivers from enjoying the “freedom and flexibility” granted to them by the current setup.
They also admitted it would hurt their bottom line. “It’s also no secret that a change to the employment classification of rideshare drivers would pose a risk to our businesses,” they wrote.
Labor activists, on the other hand, have long argued that Uber, Lyft, and other gig economy companies have unfairly skirted providing labor protections and fair wages to the thousands of workers that their companies rely on. In a Labor Day op-ed for the Sacramento Bee, Governor Newsom criticizes this “misclassification of workers,” which he says “has hollowed out our middle class and driven income inequality.”
“Employers shirk responsibility to safety net programs like workers’ compensation and unemployment insurance,” according to Newsom. “Taxpayers are left to foot the bill.”
After the announcement of the bill’s passage Wednesday, Uber’s chief legal officer, Tony West, doubled down on the company’s opposition to the legislation, announcing that the company would continue to treat its drivers as independent contractors after the bill is implemented January 1. He argues that Uber is not, in fact, in the business of providing rides, but serves as a “technology platform for several different types of digital marketplaces.”
“Just because the test is hard doesn’t mean we will not be able to pass it,” West said.
The “test” he is referring to is the three-part “ABC” test that the law would use to determine a worker’s status, which mandates that a worker can only be considered a contractor if they are:
- Free from the “control and direction” of the company they’re working for.
- Performing work that is “outside the course” of the company’s usual business.
- And have their own independently established trade, occupation, or business.
Once the bill goes into effect, workers that are reclassified will receive all labor protections required under the law, including a $12 minimum hourly wage, health care, paid breaks, and unemployment. Aside from gig economy tech giants, it’s expected to impact construction workers, nail techs, freelancers, janitors, and more, although a number of workers—including doctors, real estate agents, lawyers, fine artists, and others—will be exempt.
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