In a major legislative development that could have a profound impact on the gig economy, California’s State Senate passed, 29 to 11, a Bill requiring ride hailing companies like Uber and Lyft to treat their contract workers as employees.
The Bill, which is likely to pass the State Assembly and get the Governor’s signature to become law, will enhance workers’ rights, increase costs for gig economy companies and potentially have knock-on effects in other States.
The Bill, known as AB 5, is a consequence of a California Supreme Court 2018 ruling on employee status and could cost Uber and Lyft $3,625 per driver as per a report from Barclays, released in June.
Various benefits
Overall, the legislative changes could cost Uber $500 million and Lyft $290 million, by giving their workers paid leave, minimum wages, health benefits, collective bargaining rights and so forth.
Uber and Lyft have been opposed to the Bill and had, on August 29, announced a $60 million fund to support a 2020 State ballot measure — a mechanism that asks eligible voters whether they approve or reject a proposed law.
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The companies’ drivers work as independent contractors and do not get paid medical leave, minimum wage and other benefits that employees are entitled to. Uber and Lyft have said that their ballot measure, would seek to maintain drivers in independent contractor status but give them some protections and rights as regards minimum wage, collective bargaining and health care. DoorDash — a food delivery company — said it would contribute $30 million to the fund.
The State Assembly will vote on AB 5 later this week. California Governor Gavin Newsom is expected to sign the Bill as he has already endorsed it. If passed and signed, the Bill will become law on January 1.
