SAN FRANCISCO (reuters) – The California State Senate voted Tuesday to pass a bill that will make it much more difficult for the gig-economy companies such as Uber Technologies Inc. UBER.(N) and Lyft, Inc. (“LYFT.D) classification of workers as self-employed workers than for employees.
The bill, which was sponsored by California Assemblywoman Lorena Gonzalez, and will be supported by the Governor, Gavin Newsom, passed by the chamber, with 29 votes in favour and 11 votes against it.
Referred to as AB5, for the law has garnered national attention, due in large part to the size of California’s population. Several of the Democratic presidential candidates have endorsed the measure, including U.S. senators, Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont, and Kamala Harris of California.
“With the adoption of AB5, and the California legislature to solidify our state’s position as the national director of the workplace rights,” and the California Labor Federation, said in a statement.
The bill is sharply criticized by trade groups and the so-called “gig economy” technology companies that rely heavily on the state’s 450,000 employees.
“We are fully prepared to take this issue to the voters of California to preserve the freedom of, and access to drivers and riders, want and need,” Lyft said in a statement.
The bill hits at the very heart of the “gig-economy” business models, technology platforms such as Uber, Lyft, DoorDash, PostMates, and others who are dependent on hundreds of thousands of self-employed persons, not full-time employees, driving of passengers or the delivery of the food to the app-based services.
Backers of the bill, including labor groups, have argued that the classification of these, California, the staff would make the correction to the long-term driver of any complaints about low wages and lack of medical insurance and other benefits.
The effect of the bill is yet to be determined, in the short term, for both Uber and Lyft, who have argued that the law impinges on the flexibility that is valued by employees, and fewer employees would be hired, they were considered to be employees.
Sandra Alzate, 51, a vice-president of a trucking company, poses for a portrait in Los Angeles, California, on September 10, 2019. The photo was taken on September 10, 2019. REUTERS/Lucy Nicholson
Both of these companies are unprofitable and have historically relied on subsidies to attract riders.
In the last few weeks, Uber, Lyft, and DoorDash have been pushing for separate legislation that would increase pay and benefits for the drivers have to maintain their status as independent contractors. The people in charge of the company said, as a compromise, a deal is still possible, even after the expiry of the period of AB5.
Uber and Lyft have both said they would support a minimum wage when they are driving on a trip, at $21 per hour.
The two rides are made by corporate customers, and DoorDash, intended for $ 90 million, for a planned November 2020 ballot initiative that would exempt it from the law.
The bill will return to the Assembly for a final vote and then on to the Governor Newsom for signing.
California is the nation’s most populous state, and has been a leader in the adoption of policies that have been adopted by other states as well.
CALIFORNIA COURT CASE
The bill codifies one end of 2018, the California Supreme Court decision, Dynamex Operations West, Inc. v. The Superior Court, which is a more rigorous, three-point test to determine whether or not the workers are properly classified as independent contractors.
The court said the workers are the employees of a company under the state wage laws if the company has control over their work, whether or not they are an integral part of the business.
FILE PHOTO: The Lyft Driver and the Hub, it is to be seen in Los Angeles, California, united states, March 20, 2019 at the latest. REUTERS/Lucy Nicholson/File Photo
Uber’s Chief Legal Officer, Tony West, said little would change in the immediate aftermath of the law, since the passage of the bill will not be automatically re-arrange drivers.
Uber are able to “meet the tougher the test, to the satisfaction of the arbitration, and the courts, and if necessary, West said.
Last week, the bill was amended to have the city’s solicitors to commence proceedings for injunctive relief if the premises do not hold on to AB5.
Reporting by Ismail Shakil in Bengaluru, Alexandria Sage and Lisa Baertlein in San Francisco, and Dan Wiessner in New York; Additional reporting by Akanksha Rana, and Bhargav Acharya, Bengaluru; Editing by Arun Koyyur, and Cynthia Osterman