SACRAMENTO, Calif.—The California Legislature has approved a landmark measure that would prohibit hiring workers as “independent contractors” unless their employers can prove they are legitimately independent businesspeople.
Assembly Bill 5, passed on Sept. 11 by 61-16, is intended to ensure that “workers who are currently exploited by being misclassified as independent contractors instead of recognized as employees have the basic rights and protections they deserve under the law, including a minimum wage, workers’ compensation if they are injured on the job, unemployment insurance, paid sick leave, and paid family leave.”
The state Senate approved it by 29-11 the day before. Gov. Gavin Newsom, who had earlier urged a compromise that would allow gig-economy companies to continue hiring independent contractors but with more protections, endorsed the bill on Sept. 2, in an op-ed article in the Sacramento Bee. If he signs it, it would go into effect Jan. 1. It is expected to cover more than a million workers in the state, including Uber and Lyft drivers, DoorDash and Amazon delivery workers, and janitors, truckdrivers, and health-care workers.
“Today the Legislature made it clear: We will not in good conscience allow free-riding businesses to profit off depriving millions of workers from basic employee rights that lead to a middle-class job,” Assemblymember Lorena Gonzalez (D-San Diego), the bill’s sponsor, said in a statement. “It’s our job to look out for working men and women, not Wall Street and their get-rich-quick IPOs.”
“Our legislature has led for working people in a way the federal government has failed to, making clear that there’s no room in our state for building so-called new or innovative businesses on the backs of workers who struggle to survive,” SEIU California State Council President Bob Schoonover said.
“For too long, gig companies like Uber and Lyft have been allowed to operate under a different set of rules than all other employers—or no rules at all,” New York Taxi Workers Alliance executive director Bhairavi Desai said, crediting the “incredible organizing” of Rideshare Drivers United in Los Angeles for the bill’s success.
The bill would use a three-part test called the “ABC test” to determine whether a worker is a legitimate independent businessperson. Independent contractors would have to be working without being controlled by the hiring entity, doing work “outside the usual course of the hiring entity’s business,” and be “customarily engaged in an independently established trade, occupation, or business” doing that kind of work.
Uber chief legal officer Tony West said in a statement that the company would not classify drivers as employees because their work is “outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces.”
Lyft, Uber, and DoorDash have pledged $30 million each to put an initiative that would partially exempt gig-economy workers from the law on the state ballot in 2020. “We are fully prepared to take this issue to the voters of California,” Lyft said in a statement Sept. 10.
That initiative, West said, would follow what Uber had advocated as an alternative to the AB5 bill. It proposed keeping drivers as independent contractors, but setting a minimum wage for time they have a passenger or are cruising; creating an industry-wide “portable benefits fund administered by an independent third party”; and some form of “sectoral bargaining.”
If drivers became full-time employees, the company said, that “would fundamentally change what Uber and ridesharing is.” It said it would likely hire far fewer drivers, require a minimum number of hours per week, and limit the number of drivers in low-demand places or times.
California unions rejected that proposal. Any compromise that falls short of “real collective bargaining,” California Labor Federation communications director Steve Smith told LaborPress, “is a nonstarter for us.”
The final version of the bill exempts a few dozen occupations, primarily independent professionals such as doctors, dentists, insurance agents, stockbrokers, lawyers, accountants, real-estate agents, hairstylists, commercial fishermen, travel agents, graphic designers, and freelance writers and photographers who license submissions to a specific employer less than 35 times a year. The Senate also amended it to exempt part-time newspaper-delivery workers for one year.
However, Smith says, those exemptions do not include the industries where independent-contractor abuse has been “the biggest problem”: gig-economy jobs where people work through apps; construction; trucking; janitorial services (where some contractors require workers to bring their own cleaning supplies and then deem them “independent” businesspeople); and health care, where some staffing agencies send technicians and phlebotomists out on jobs as independent contractors.
“Not only is this a huge victory for us in California,” Smith says, “but it’s going to set the tone for the debate all over the country.”
In New York, the Do It Right Employment Classification Test (DIRECT) coalition, an alliance of unions, “worker center” organizations, and community groups that includes 32BJ SEIU, NYTWA, Workers United, and the National Employment Law Project, is advocating a similar measure. The “rampant misclassification” of workers, the coalition says, “is hurting New Yorkers “from bike messengers and for-hire drivers to app-based workers, tutors, nail-salon workers, and night-club workers.”
“We desperately need a more vigorous, pre-emptive approach,” 32BJ President Kyle Bragg said in a statement. “This problem robs workers and their families of basic labor standards at the expense of local communities that thrive on good jobs and small businesses that follow the law.”
The bill would be called the Fair Play in Employment Act. The coalition is still finalizing sponsors, 32BJ deputy communications director Amity Paye told LaborPress, but they expect it to be introduced when the state Legislature’s next session begins in January.