New Law Could be the End for Uber in California

On Wednesday, the California Senate passed a bill, that would classify gig economy workers as full-fledged employees. Labor activists and liberal legislators praised the Senate’s passage of this bill as a victory for the little guy.

However, Uber—the main company targeted by this legislation—declared in a statement that its drivers’ work “outside the usual course” of the company’s business and will still maintain their status as independent contractors.

Under this bill, the reclassification of gig economy workers as employees would grant them wage protections and a full array of benefits, which include health care, paid time off, and reimbursement for expenses. But Uber asserts that the law does not actually affect the drivers who use the company’s app to give rides.

“AB5 does not provide drivers with benefits, nor does it give drivers the right to organize. In fact, the bill currently says nothing about rideshare drivers,” Tony West, Chief Legal Officer at Uber, said in a statement. “What AB5 does do is fairly straightforward: it inserts into the California labor code a new legal test that must be used when determining whether a worker is classified as an independent contractor or an employee.”

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The aforementioned standard was determined in Dynamex Operations West, Inc. v. Superior Court of Los Angeles, a 2018 California Supreme Court decision that established the “ABC test” for separating employee versus contractor status. To prove that their workers are contractors and not employees, companies must be able to show that those workers control their workload, carry out work that falls outside of the business’s normal scope, and are “customarily engaged” in the business.

However, the second requirement is arguably the hardest to meet. “But just because the test is hard does not mean we will not be able to pass it,” West stated. “In fact, several previous rulings have found that drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces.”

West acknowledged that this claim will more than likely be challenged in court. That being said, Uber is willing to negotiate by offering drivers a $21 minimum hourly wage when they are taking passengers or are en route to pick up new clients. However, California legislators flatly rejected Uber’s compromise.

“California has a long history of Wall Street billionaires pumping a fortune into ballot measures to further erode the middle class for their benefit,” Assemblywoman Lorena Gonzalez (D–San Diego), the bill’s author, declared in a statement. But The New York Times reports that many of those beneficiaries have come out against the bill, citing their desire to continue working on a more flexible schedule.

Such gig economy opportunities allow the most vulnerable in society to earn extra income on the side. By imposing new government standards, they would be deprived of additional income sources and even an employment opportunity especially if they are in economic hard times.

The bill is heading to Democratic Governor Gavin Newsom’s desk, who has pledged to sign it. But he revealed to The Wall Street Journal that he’s still all ears for opposing concerns from companies like Uber.

“These remain ongoing negotiations,” he stated, “and regardless of what happens with AB5, I am committed, at least, to continuing those negotiations.”

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