Tech companies, drivers and regulators are working fast to deal with a new law in California that will require “gig economy” companies to offer their workers a full range of employee benefits.
There are a number of lingering questions about the controversial legislation, which California Gov. Gavin Newsom (D) signed into law last week — including what it will look like by the time it’s implemented.
Gov. Newsom has vowed to seek changes that carve out a middle ground between the labor organizers behind the push and companies like Uber and Lyft, which are planning to funnel millions of dollars into a ballot measure intended to overturn the law.
“I will convene leaders from the Legislature, the labor movement and the business community to support innovation and a more inclusive economy by stepping in where the federal government has fallen short,” Newsom wrote in a signing statement last week.
Labor advocates and industry watchers say the law — called Assembly Bill 5, or A.B. 5 — is a game-changer when it comes to regulating how gig economy companies are allowed to treat their workers. And if other states adopt California’s approach, companies like Uber, Lyft and DoorDash will find it harder to move forward with the same business model.
“California is setting an example for the nation on the future of the gig economy,” Alex Rosenblat, a researcher focused on the future of work with the Data and Society Research Institute, said.
App-based service providers like DoorDash and Uber have avoided providing full benefits to employees by designating them as independent contractors.
But under the California law, most gig economy workers in the state will be classified as employees, allowing them to access benefits like a minimum wage and labor protections, including the right to organize.
Nicole Moore, an organizer with Rideshare Drivers United — the largest rideshare organization in California — said that thousands of drivers are set to band together to negotiate their rights with companies like Lyft and Uber.
“A.B. 5 is an incredible beginning to getting [the gig economy] under control, and it’s principled unions, brave politicians and, frankly, drivers who were able to get this law passed,” Moore said. “Now, because the companies have said they’re not even going to follow the law, it’s become our job … to force them to follow the law. And we’re preparing to do that.”
“We’re building our union right now,” she said.
Uber and Lyft have made it clear that they believe the California law is an existential threat to their business. Analysts have estimated the legislation could raise expenses for the companies by as much as 15 to 20 percent, and Uber has said outright that it will not classify its drivers as employees.
“Because we continue to believe drivers are properly classified as independent … drivers will not be automatically reclassified as employees, even after January of next year,” when the bill would go into effect, Uber chief legal officer Tony West said in a statement.
DoorDash, Uber and Lyft have committed to spending $30 million each to promote the ballot initiative.