California Senate approves legislation requiring Uber, Lyft to consider drivers as employees

California Senate approves legislation requiring Uber, Lyft to consider drivers as employees

The California Senate on Tuesday passed a landmark bill that could reshape how companies are required to treat their workers in the gig economy.

The bill, known as A.B. 5, would require companies including Uber and Lyft to treat its contract workers as employees, meaning the companies would have to offer them the full breadth of employee benefits. 

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A.B. 5 passed the state Senate in a 29 to 11 vote. The legislation still needs to pass the state Assembly, where a a vote is scheduled later this week.

California Gov. Gavin Newsom (D) has not yet said publicly if he will sign the bill, leaving open the possibility that it may not become law even if passed by the Legislature.

If it does become law, the legislation would go into effect at the start of 2020 and would mean workers would be designated as employees instead of contractors if a company exerts control over how they perform their tasks or if their work is part of a company’s regular business.

Gig economy workers such as drivers for Uber and Lyft are not afforded the same rights as employees. They are not entitled to worker’s rights such as a minimum wage, overtime pay, unemployment insurance and paid sick leave, among other benefits.

“The passage in California of AB5 is a resounding victory for workers and responsible businesses in that state and across the nation," Rebecca Smith, the director of the Work Structures program at the National Employment Law Project, said in a statement.

"California is paving the way for other states to ensure that workers are not carved out of the employee rights and benefits that they need and deserve," she added.

Under the law, food-delivery workers, janitors, nail salon workers, construction workers and franchise owners could also be reclassified as employees.

The bill is expected to impact at least 1 million workers in California alone, with other states potentially following suit on similar legislation in the future.

The major app-based ride-hailing platforms have built their companies on the independent contractor dynamic that they consider vital to their business model.

Both Uber and Lyft launched public campaigns against the legislation, seeking to rally their drivers against the bill. Uber, Lyft, DoorDash and the Internet Association, a group that lobbies for the technology industry, have spent more than $1 million lobbying the Legislature in just the past six months, much of it on A.B. 5, according to a review of California lobbying disclosures.

Uber, Lyft and DoorDash have each pledged $30 million to mount a ballot initiative campaign exempting their companies from the law if A.B. 5 passes.

Analysts have predicted the legislation could raise expenses for the companies by up to 20 percent.

Gig Workers Rising, a labor group advocating for A.B. 5, hailed its passage.

"This victory is a direct result of drivers organizing," the group said in a statement. "Drivers continued to fight for a voice in the face of insidious tactics by corporations to spread misinformation and squash their demands."

"As we commemorate this moment we take renewed energy towards the fight for unionization," Gig Workers Rising added. "Drivers must have an independent voice at the negotiating table."