Yesterday, California lawmakers passed a landmark bill which would require companies such as Uber and Lyft to treat their contract workers as employees. The September 10th ruling threatens to reshape the largely contract-based “gig economy”, which has been widely criticised for its lack of worker protections.
Assembly Bill 5 (AB5) seeks to close a legal loophole regarding the economic benefits guaranteed to California’s workers. Most labour rights in the US—including fundamentals such as minimum wage, overtime, and sick days—are protected only on the basis of formal employment status.
The bill has drawn support from local activists as well as progressive Democratic leadership figures such as 2020 presidential candidates Bernie Sanders and Elizabeth Warren, who have long argued that labour rights have failed to keep pace with the demands of an evolving 21st-century economy.
“We are determining the future of the California economy,” Democratic State Senator Maria Elena Durazo said. “We can either choose to become complicit in the exploitation of hard-working Californians, or we choose to rebuild the working and middle class, protect taxpayers and help responsible businesses thrive in the state.”
AB5 would impact more than 1 million low-wage workers in California who have been pushed into contractor status as modern companies increasingly seek the financial benefits and limited accountability that come with hiring contract workers.
The bill will progress to the state Assembly later this week, where it is expected to succeed despite fierce opposition from gig-economy leaders.
According to a report by the LA Times, companies such as Uber, Lyft, Postmates and Doordash, whose business models rely largely on contract labour, have already pledged $90 million in a joint effort to lobby against the legislation’s effects.
California’s Silicon Valley darling Uber, which built a multi-billion dollar empire on an innovative contract labour model, quickly refused to recognise the legitimacy of the AB5 ruling in a statement released following the ruling.
“We continue to believe drivers are properly classified as independent, and because we’ll continue to be responsive to what the vast majority of drivers tell us they want most—flexibility—drivers will not be automatically reclassified as employees, even after January of next year,” the company said. Uber, which has a history of vicious legal disputes with local governments, promised to fight the ruling.
AB5’s success highlights a shift in the way governments are responding to the rapidly-growing gig economy. In 2016, a UK employment court denied Uber the right to classify its workers as self-employed. In 2018, Democratic lawmakers advanced federal legislation aimed at guaranteeing rights to contract labourers.