California's Gig Economy Bill Becomes Law

The CEOs at Uber and Lyft opposed the legislation saying it would cause their companies harm. File

The CEOs at Uber and Lyft opposed the legislation saying it would cause their companies harm. File

Gavin Newsom has signed sweeping legislation aimed at giving wage and benefit protections to rideshare drivers and workers in other industries.

Newsom pledged on Wednesday to continue the discussion with business groups anxious about the new law, which takes effect next year.

As Bay City News reports, the new law will take effect in 2020, and Newsom called it "landmark legislation for workers and our economy". It could upend the business models of companies that depend on armies of independent contractors, who aren't guaranteed employment protections like minimum wage and overtime.

"The hollowing out of our middle class has been 40 years in the making, and the need to create lasting economic security for our workforce demands action", Newsom wrote.

Assembly Bill 5 (AB5), introduced by Assemblywoman Lorena Gonzalez in January, meant to codify a recent state U.S. Supreme Court decision into law. When Uber filed to become a publicly traded company with the US Securities and Exchange Commission in April, it said, "Our business would be adversely affected if drivers were classified as employees instead of independent contractors". "As one of the strongest economies in the world, California is now setting the global standard for worker protections for other states and countries to follow".

A spokesman for Lyft said it was hopeful the company could work with the governor's office to "reach a historic agreement", but added, "if necessary we are prepared to take this issue to the voters to preserve the freedom and access drivers and passengers want". "AB 5 is a powerful counter to the corporate greed and rampant exploitation that's driving inequality across our state in emerging and traditional industries alike".

There are obviously two sides to every story, and in this case, Uber and gig-oriented companies at large are not the only ones with concerns surrounding AB5. Uber CEO Dara Khosrowshahi, Lyft CEO Logan Green and Lyft President John Zimmer wrote in an op-ed in the San Francisco Chronicle in June that the measure would cause them harm. The federal government considers so-called gig workers to be independent contractors.

"While I personally disagree with this delay, I'm willing to allow the newspaper industry the additional year to comply if it means those delivery drivers and almost a million other misclassified workers are provided the minimum wage, benefits and workplace rights of Assembly Bill 5", Gonzalez said in a statement issued last week. In short, the law applies the three-part "ABC" test laid out in California's 2018 "Dynamex" legislation to independent contractors.

"I'm proud to have had a small part in redefining labor law in this state and starting a path to reducing income inequality and rebuilding the middle class". AB 170 would offer a one year exemption from AB 5 for newspaper carriers and publishers who are under contract.

Drivers in a ride-sharing company are not core to Uber's business model. Wow.

A number of professions-such as cosmetologists, commercial fishermen, and real estate agents-are exempt from reclassification under this new law. OOIDA told its California members, "We see it as self-inflicted by motor carriers after decades of treating drivers like indentured servants, perpetuating an environment with very bad working conditions, and a failure to pay drivers anything close to a living wage".

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