California passes landmark bill to recreate the gig economy

SACRAMENTO – California lawmakers approved a landmark bill on Tuesday requiring companies like Uber and Lyft to treat contract workers as employees, a move that could reshape the gambling job and provide fuel for a year-long debate over whether work has become too uncertain.

The bill passed by 29 to 11 votes in the state Senate and will apply to app-based companies, despite their efforts to negotiate an exemption. California Governor Gavin Newsom approved the bill this month and is expected to sign it. Under the measure, which will come into force on January 1, employees must be designated as employees instead of contractors if a company exercises control over how they perform their tasks or if their work is part of a company's ordinary activities.

will affect at least one million California workers who have been on the receiving end of a ten-year trend of outsourcing and franchising, making employer-employee relationships more arm's length. Many people have been pushed to entrepreneurial status without access to basic protection such as minimum wage and unemployment insurance. Drivers, food delivery couriers, caretakers, nail salon workers, construction workers and franchise owners could all now be classified as employees.

But the bill threatens concert companies like Uber and Lyft. Corporate travel – along with app-based services that offer food delivery, home repairs and dog walking – have built their businesses on cheap, independent labor. Uber and Lyft, which has hundreds of thousands of drivers in California, have said contract work gives people flexibility. They have warned that recognition of drivers as employees can ruin their business.

The bill, which codifies and extends a California Supreme Court ruling in 2018, could affect other states. A coalition of working groups is pushing for similar legislation in New York, and bills in Washington State and Oregon that resemble California but failed to move forward could see a renewed momentum. New York City passed a minimum wage for drivers last year, but did not try to make them employees.

"There will be great reverberations around the country," said David Weil, a top official in the Department of Labor under the Obama administration and author of a book on the so-called fissuring of the workplace. He argued that the bill could set a new framework for employee protection and force business owners to rethink their dependence on entrepreneurs.

"It is especially critical because of the impact it will have on the development of other business models," said Mr. Det Weil.

California lawmakers said that the bill, known as Assembly Bill 5 and proposed by state Assemblywoman Lorena Gonzalez, a Democrat, would set the tone for future work.

"Today, the so-called gaming jobs present themselves as tomorrow's innovative future, a future where companies do not pay social security or medicine," says State Senator Maria Elena Durazo, a Democrat. "Let's be clear: there is nothing innovative paying someone for their work. "

She added," Today we determine the future of the California economy. "

Gigantic work has been in the spotlight for many years as companies like Uber, Lyft and DoorDash in the United States – as well as Didi Chuxing in China and Ola in India – have grown to behemoths even though the contractors they trusted did not receive benefits or minimum wages guaranteed to employees, many of whom have worked diligently to turn back efforts to classify their workers as employees, arrange class action lawsuits from drivers and secure exceptions to rules that may have jeopardized drivers' freelance status.

While regulators in California and at least three other states – New York, Alaska and Oregon – had found that drivers were employees of state laws for narrow purposes, such as eligibility for unemployment insurance. These findings could be overridden by state laws that explicitly consider drivers as contractors. About half of the states in the nation had passed such regulations.

But more recently, the tide began to change. Two federal proposals introduced since 2018 have sought to redefine the way workers are classified to allow more of them to unite. These proposals have received support from candidates for the Democratic presidential election, including Senators Kamala Harris, Bernie Sanders and Elizabeth Warren. The presidential hopefuls also endorsed the California bill.

In the United Kingdom, Uber has appealed from a labor court ruling that drivers must be classified as workers entitled to minimum wages and holidays. The country's supreme court is expected to hear arguments in the case next year.

"Some kind of benefit to some population leaders seems inevitable," said Lloyd Walmsley, a Deutsche Bank research analyst who follows the ride-hailing industry.

A critical question is how corporate companies will respond to California's new law. Industry employees have estimated that having to rely on employees instead of contractors increases costs by 20 to 30 percent.

Uber and Lyft have repeatedly warned that they must start scheduling drivers in advance if they are employees, which reduces the driver to work when and where they want.

Experts said there is nothing in the bill that requires employees to work on shifts, and that Uber and Lyft are legally entitled to continue to allow drivers to make their own planning decisions.

practice, Uber and Lyft may choose to limit the number of drivers who can work in slow times or in less busy markets, where drivers may not generate enough to justify labor costs as employees. This can reduce the need for drivers everywhere.

But Veena Dubal, a professor at the University of California Hastings College of the Law, said it would still be advantageous for Uber and Lyft to rely on incentives as bonus pay to ensure they had enough drivers on the road to adapt to customer needs a lot more unpleasant than if they planned drivers in advance.

"It doesn't make sense to them" to drastically limit flexibility, she said.

Some of the companies have not finished fighting the bill. Uber, Lyft and DoorDash have pledged to spend $ 90 million to support a voting initiative that will essentially exempt them from the legislation. Uber has also said it will process misclassification claims from drivers in arbitration and press lawmakers to consider a separate bill that may exempt them from A.B. 5's impact when the legislative session begins in January.

California cities want ways to enforce the new law. In last-minute changes to the measure, lawmakers gave big cities the right to sue companies that don't follow suit.

The proposal was not universally supported by drivers. Some opposed it because they worried it would make it difficult to keep a flexible plan. After Uber and Lyft sent messages to drivers and riders in California in August asking them to contact lawmakers on behalf of the companies, lawmakers said they had noticed a spike in conversations.

As the bill hurt its way through legislation, ride-hailing companies sought an agreement to create a new category of workers between contractor and employee. They met with working groups and Governor Newsom's office to negotiate a deal to give drivers a minimum wage and the right to organize, while they stopped classifying them as employees.

But in July and August, the working groups struck, and the proposed agreement disbanded. Some corporate executives have expressed cautious optimism in recent days about entering into a labor agreement under the Bill.

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