California Passes Bill Requiring Companies to Classify the People They Employ as ‘Employees’
The California Senate on Tuesday passed a landmark measure that would require companies that rely on a workforce of independent contractors, most notably tech industry giants Uber and Lyft, to classify the people who do labor for them as, get this, “employees.”
The bill’s passage could have far-reaching implications on the future of the gig economy, as groups in several other states are trying to advance similar measures that would prevent companies from shirking the obligations most employers’ have toward their work force by reclassifying them as contractors. It could also signal a willingness for legislators to take a more aggressive approach in regulating the tech industry, which has been largely successful in tamping down potential government interference.
Assembly Bill 5, which would go into effect next January 1st, holds that a company must label workers as employees, not contractors, if the company relies on their work for its regular business. The designation would allow these contractors-turned-employees to receive “perks” like sick leave, minimum wage, and other benefits companies are not legally required to provide to contractors.
The measure passed the California Senate 29-11 and will now move onto the overwhelmingly Democratic California State Assembly. Once it passes there, it will move to the desk of Democratic Governor Gavin Newsom, who has already expressed support for the bill, most notably in an op-ed for the Sacramento Bee published on Labor Day.
“Contributing to [income inequality] is the misclassification of workers, where companies eager to save on labor costs identify workers as ‘independent contractors’ rather than employees,” Newsom wrote. “Workers lose basic protections like the minimum wage, paid sick days and health insurance benefits. Employers shirk responsibility to safety net programs like workers’ compensation and unemployment insurance. Taxpayers are left to foot the bill.”
Though the measure isn’t going to have any trouble moving through the California state legislature, it’s faced plenty of pushback from the private section. Companies the bill ostensibly aims to target, such as Uber and Lyft, have been lobbying for exemptions, and Newsom said on Tuesday that negotiations are still ongoing with the ride-sharing giants and other gig economy companies trying to find ways to mitigate the impact the bill’s passage would have on their bottom line.
Uber and Lyft — who along with food-delivery service Door Dash have said they will spend $90 million on a ballot measure to fight the bill — have argued their businesses rely on independent contractors, and that AB5 would restrict the schedule flexibility many of these contractors value.
California State Assemblywoman Lorena Gonzalez, who introduced the bill, disagrees. “They have claimed the measure will eliminate the flexibility in workers’ lives,” she wrote Wednesday in an op-ed for the Washington Post. “To be clear: There is nothing preventing these companies from offering flexible scheduling to employees. Flexibility is and will always be at the employer’s discretion.”
“It is time to stand up for the rights of workers,” she added. “They deserve better, and we can no longer afford to look the other way.”