California senators on Tuesday passed Assembly Bill 5, a proposed law that's now likely to be signed by the Governor and one that Uber and Lyft have fought heavily against.
The law, which would take effect January 1 if signed by Gov. Gavin Newsom, could force many gig-economy companies to reclassify their workers as employees thanks to the codification of a three-part test.
That would mean major expenses thanks to higher wages and other benefits like overtime and health care that could potentially bankrupt the companies. Instead, Uber, Lyft, and DoorDash have pledged $90 million to take the issue to voters.
"Making all drivers full-time employees, whether or not they want it (and to be sure, most don't), would fundamentally change what Uber and ridesharing is," Uber said in an August blog post. "It would also effectively require us to do something that is both unrealistic and never been done before: on-demand employment. As experts have noted, converting drivers to employees will inherently come with tradeoffs, for them and for us."
Uber's proposal hopes to give workers many of their demands, while preserving the independence many love about the ride-hailing apps. This suggestion includes a guaranteed hourly earnings rate of $21 while on the way to a fare or actively shuttling passengers (about 60% of drivers' time), access to portable benefits that could follow someone between gigs, and sectoral bargaining on an industry wide basis (as opposed to company-specific negotiations).
"Achieving a legislative solution is our top priority, but should the legislature fail to act, we will be left with no choice but to pursue a ballot initiative," Max Rettig, DoorDash's head of public policy, said in an emailed statement. "We're confident that California voters support a solution that pairs worker flexibility with economic security."
Beyond the trio of companies that have pledged money to the ballot proposal, other gig-economy companies stand to be greatly impacted by the new rules should they become law.
Instacart, Postmates, and two industry organizations joined Uber and Lyft in their opposition, saying in a letter to lawmakers that they were unfairly targeted. The proposal is vital for these companies, as labor groups in other states like New York look to establish similar protections for workers.
"We remain committed to working with the Governor, legislature, labor leaders, and workers supported by our technology platforms to establish progressive policies that better reflect the unique nature of this work, while also improving the quality and security of the work enabled by relevant labor laws," they said in the letter dated September 9.
"Unfortunately, the bill now goes beyond the effort to exempt various industries and instead alters the venues and path through which these standards would be interpreted and applied."
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