After the better part of year, California’s Senate today passed AB5, legislation that is expected to unravel the contractor business model of companies like Uber, Lyft, and Doordash. In a historic victory, workers for those companies and others like them are now likely to be considered employees, entitled to the benefits and protections that status conveys.
Gig work platforms have faced mounting criticism that their businesses rely on the misclassification of their workforces as independent contractors, while depriving workers of any meaningful sense of self-determination—a key element of a contractor being truly independent. The absence of minimum workplace protections has left rideshare drivers paying out of pocket for work-related expenses like fuel and vehicle upkeep, while platforms determine how and when they shuttle passengers and can essentially fire them at any time for any reason. This lopsided arrangement has led to coordinated worldwide protests from this precarious workforce, who at least in California, are finally seeing some relief.
The bill, which was introduced to the California State Assembly in January by Assemblywoman Lorena Gonzalez, still requires another pass in the Assembly and Governor Gavin Newsom’s sign-off. However, he recently signaled support for the initiative, and the Assembly is expected to easily pass the Senate’s version. “I am proud to be supporting Assembly Bill 5, which extends critical labor protections to more workers by curbing misclassification,” Newsom wrote in a Sacramento Bee op-ed published on Labor Day. “California has the power to act so these workers can have a real voice at work—one that can transform their lives and reshape our economy.”
AB5 sailed through the House with a 53-11 vote, the Senate’s Labor, Public Employment, and Retirement Committee in a 3-1 vote, the Senate Appropriations Committee with 5-2 support. Today the bill passed the Senate’s full session 29-11, with all forty lawmakers voting along party lines after nearly two hours of deliberation. While Republican lawmakers crowed that the bill picked “winners and losers” the simple messaging of AB5's Senate floor jockey, Sen. Maria Durazo, captured the soul of the legislation: “One job should be enough.”
AB5 effectively codifies into a law a state Supreme Court decision from mid-2018 which upheld that drivers working for a specific logistics company, Dynamex, were doing the work of employees rather than contractors as they had been classified. The Supreme Court reached this conclusion by applying a stringent test—called the ABC test—to determine if these workers had sufficient control over how they performed their work and found they did not.
The three-part test, as relayed in the Supreme Court’s majority opinion, seeks to find if:
(a) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; and
(b) that the worker performs work that is outside the usual course of the hiring entity’s business; and
(c) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
The labor scheme those drivers were involved in very closely resembles the same independent contractors status gig workers are erroneously classified as.
Driver groups like Gig Workers Rising, Rideshare Drivers United, and the Mobile Worker Alliance have vociferously supported AB5, holding frequent rallies, protests, and a multi-day caravan across the state. Uber, Lyft, and Doordash have reportedly engaged in a variety of tactics to build consensus against the bill, up to and including just throwing tens of millions of dollars at opposing it. Among their dirtier alleged tricks, drivers for both Uber and Lyft said they were requested to sign petitions opposing AB5, and the I’m Independent Coalition—a front-group funded in part by Instacart, Handy, Lyft, Postmates, Caviar, Uber, and DoorDash—was found to have paid drivers to show up and protest the bill.
The extent to which AB5 would affect gig work platforms—particularly Uber and Lyft, which both have some of their biggest markets—as well as their corporate headquarters, in California, is unknown, though experts estimate it could add as much as 30 percent to labor costs. As top brass of Lyft and Uber, in a co-bylined editorial in the San Fransisco Chronicle, put it: “It’s also no secret that a change to the employment classification of ride-share drivers would pose a risk to our businesses.” Investors, perhaps fearful of AB5, have voiced their hesitation accordingly in the markets, where the stocks of both companies have been trending steadily downward. Earlier today Uber laid off over 400 employees from its product and engineering teams; about 400 marketing team staffers were also cut in late July as the company looked to trim costs.
Leading up to AB5's passage, the Times reported, Uber and Lyft met quietly with Teamsters and Service Employees International Union leaders in an attempt to broker a less aggressive solution, though those talks eventually deteriorated. Publicly, the firms offered a $21/hour on-trip minimum wage—the crucial caveat being rideshare drivers can spend over half their travel time between trips, which would still be unpaid. While that particular option appears dead in the water with AB5's passing, gig work firms are likely to continue pushing against full employee status, pursuing additional methods to water down AB5, and they may find unlikely allies in other industries that will be impacted by the bill’s passing.
Of course one of the key demands of rideshare drivers, and now one of their biggest hurdles, will be the process of joining or forming a union. “Unions and workers across the world have been watching CA. This will be a turning of the tides—the first in many victories in fighting global inequality exacerbated by techno-capital,” Veena Dubal, an associate law professor at the University of California, told Gizmodo. “The next step is legislation to support a strong, independent driver-led Union. Workers are going to win this.”
“This victory is a direct result of drivers organizing. Drivers continued to fight for a voice in the face of insidious tactics by corporations to spread misinformation and squash their demands,” Gig Workers Rising wrote following the bill’s successful passage out of the Senate. “As we commemorate this moment we take renewed energy towards the fight for unionization.”
“Today, our state’s political leadership missed an important opportunity to support the overwhelming majority of rideshare drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits,” Lyft wrote in a statement to Gizmodo. “The fact that there were more than 50 industries carved out of AB5 is very telling. We are fully prepared to take this issue to the voters of California to preserve the freedom and access drivers and riders want and need.”
The version of AB5 passed by California’s Senate will return to the Assembly, where it is expected to pass before receiving Newsom’s signature. Once passed into law, the legislation will take effect January 1, 2020.