California is moving to codify a sweeping court decision curbing employers' use of independent contractors, and the new law is unlikely to exempt Uber, Lyft and other app-based technology companies. The two ride-hailing giants are on the verge of going public with initial stock offerings valued at tens of billions of dollars. Both companies are losing money, and converting their California drivers, currently classified as contractors, to employees would cut into their profits. "Am I concerned about the stock price of Uber and Lyft?" said Assemblywoman Lorena Gonzalez (D-San Diego), author of Assembly Bill 5, who planned to release the legislation's new language Wednesday. It doesn't keep me up at night." The bill offers exceptions for a small group of occupations and may include more as it moves through the Legislature. But employers offering services through digital platforms won't be among them, Gonzalez added. "It's not going to happen." Classifying workers as employees requires ...
Democratic Assemblywoman Lorena Gonzalez speaks at a July rally for independent contractors in Sacramento, Calif. The measure that passed Tuesday in the state Senate requires companies such as Lyft and Uber to turn many of its contract workers into full employees. Democratic Assemblywoman Lorena Gonzalez speaks at a July rally for independent contractors in Sacramento, Calif. The measure that passed Tuesday in the state Senate requires companies such as Lyft and Uber to turn many of its contract workers into full employees. Lawmakers in California have advanced a bill aimed at ensuring minimum wage, workers' compensation and other benefits for contract workers in the gig economy.
A recent California Supreme Court decision (PDF) could give Uber and Lyft drivers (as well as other gig workers) fighting to be classified as employees a huge boost. In a case against package and document delivery company Dynamex Operations West, the court has ruled in favor of the plaintiffs -- drivers seeking employment status who sued the company way back in 2005. According to the state's highest court, companies that want to classify their workers as independent contractors have to prove that those workers are running their own business. They must be able to show that workers are free from the company's control and direction in their every day tasks and that the work they do is "outside the usual course of the hiring entity's business." Further, they must be able to prove that workers are running a business of the same type they're performing for the company.
California legislators are set to decide on legislation that would fundamentally change the way tech giants like Lyft and Uber engage with workers. Assembly Bill 5 would change the way businesses classify employees and dramatically expand protections for gig workers. If it passes, the legislation would represent a big win for labor advocates across the state. "This bill not only does important things immediately for workers, but also sets a framework for the future we think is really important," said Steve Smith of the California Labor Federation. AB5 passed California's state assembly 53-11 in May and has since moved to the state senate's appropriations committee for a vote on Friday.
The California Supreme Court dealt a major blow to the gig economy on Monday in a decision that will have far-reaching effects not just for the likes of Uber and GrubHub, but for many different types of employers. The court ruled that employers must treat workers who do work related to a company's "usual course of business" as full-fledged employees. For example, if a store hires a plumber to fix a sink, that plumber wouldn't need to be considered an employee because the store isn't in the plumbing business. But if a clothing company paid someone to sew clothes at home, then that person should be considered an employee, entitled to minimum wage, breaks, and other benefits of employment. The case only directly applies to delivery company Dynamex, but it sets a precedent that could affect many types of workers in California, including care givers, dog walkers, hair stylists, and, of course, drivers for Uber and other gig economy companies, says Eve Wagner, a founding partner of Sauer & Wagner LLP with a background in employment law.