California is cracking down on the gig economy – Alexia Fernández Campbell May 30, 2019, 1:10pm EDT


The state Assembly just passed a bill that could give Uber and Lyft drivers basic labor protections for the first time.

An Instacart shopper checks her phone as she shops for a customer at Whole Foods in Denver on October 28, 2014.
Cyrus McCrimmon/Denver Post via Getty Images

California just took a major step in rewriting the rules of the gig economy.

The state Assembly passed a bill Wednesday that would make it harder for companies to label workers as independent contractors instead of employees, a common practice that has allowed businesses to skirt state and federal labor laws. The bill will now go to the state Senate.

Hundreds of thousands of independent contractors in California, ranging from Uber and Amazon drivers to manicurists and exotic dancers, would likely become employees under the bill.

That small status change is huge. These workers would suddenly get labor protections and benefits that all employees get, such as unemployment insurance, health care subsidies, paid parental leave, overtime pay, workers’ compensation, and a guaranteed $12 minimum hourly wage. It also means companies are fuming about the added cost.

The California bill, known as AB5, expands a groundbreaking California Supreme Court decision last month known as Dynamex. The ruling and the bill instruct businesses to use the so-called “ABC test” to figure out whether a worker is an employee. To hire an independent contractor, businesses must prove that the worker (a) is free from the company’s control, (b) is doing work that isn’t central to the company’s business, and (c) has an independent business in that industry. If they don’t meet all three of those conditions, then they have to be classified as employees.

That is a much clearer — and stricter — standard of proof than the vague guidelines under federal law. And it’s one of the biggest challenges yet to the profit model of Uber, Instacart, Postmates, and other tech companies that rely on a small army of independent contractors. Uber would likely have to reclassify tens of thousands of drivers in California as employees — something Uber drivers have been fighting for in court, unsuccessfully, for years.

“Big businesses shouldn’t be able to pass their costs onto taxpayers while depriving workers of the labor law protections they are rightfully entitled to,” San Diego Assembly member Lorena González wrote on Twitter after members voted overwhelmingly in favor of the bill she helped write.

California businesses have been panicking over the possibility of the bill passing. The state’s Chamber of Commerce and dozens of industry groups have been lobbying for exemptions, and a long list of professions were excluded from the bill: doctors, dentists, lawyers, architects, insurance agents, accountants, engineers, financial advisers, real estate agents, and hairstylists who rent booths at salons.

Industry groups argue that these professionals are true independent contractors, with their own businesses and power to negotiate work contracts. Lawmakers agreed. After all, the purpose of the bill is to shrink income inequality by helping workers who employers are most likely to exploit. Uber drivers are the loudest in that group.

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