Gig Workers to Become Employees Under California Bill
Starting January 1, millions of California's contractors and gig workers will be regular employees of their former clients.
The change is due to AB 5, a controversial bill passed by the state senate on Tuesday, September 10. Employers mostly opposed the bill, which is intended to end the practice of treating workers as independent contractors to avoid the expense of payroll taxes, health insurance, retirement programs, vacation pay, and other benefits. The bill applies to construction workers, security guards, janitors, and many others.
Among the fiercest opponents were Uber and Lyft, which rely upon ad hoc contract relationships with tens of thousands of independent workers. AB 5 will increase their cost of doing business in California by 20 to 30 percent.
In spite of aggressive lobbying by the ride-share companies, the bill passed both houses of the California legislature and headed for quick approval on the governor’s desk.
Uber and Lyft argued in favor of continuing to treat drivers as contractors, hoping to sustain their business model with a few tweaks like company-paid time off and insurance as well as a minimum pay rate for time spent picking up and dropping off passengers. The companies said they would help create an association to advocate for drivers and negotiate further improvements.
The companies were unable to strike a deal, however, in spite of efforts that included emailing drivers and passengers in California, urging them to lobby lawmakers in support of the proposed compromise.The New York Times has published a detailed report covering what this landmark bill represents and how it could change the way the gig economy works not just in California, but across the nation.
AB 5 builds upon a 2018 California Supreme Court ruling that includes an objective framework for determining whether a worker should be considered an independent contractor or an employee.
The fight is hardly over, especially since Uber and Lyft have pledged millions of dollars for a statewide voter referendum on exempting them from the new bill.
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