On September 11, the California State Senate passed bill AB 5, despite the efforts of gig companies such as Uber and Lyft. The bill requires that businesses hire workers as full employees and not just as independent contractors, with some exceptions. This change in the law will allow hundreds of thousands of individuals in California to exercise their full labor rights for the first time and go a long way towards setting a national precedent for the reinforcement of workers’ rights. This change strikes a major blow to the business model currently favored by Silicon Valley. App-based gig companies such as Uber and Lyft are reliant on classifying their workers as independent contractors instead of employees in order to ensure that they can undercut the prices of traditional taxi services while keeping profits as high as possible. AB 5 helps to ensure that gig workers would get the same labor rights that all employees in California have such as paid parental leave, overtime, a $12 minimum wage, unemployment insurance, healthcare subsidies, paid breaks, and the right to unionize.
Because these rights would cut into profit margins, gig industry giants such as Uber, Lyft, and DoorDash have already threatened to spend at least $30 million promoting a ballot measure to completely overturn AB 5. These threats have been met by a vigorous response from the California Labor Federation; whose treasury secretary, Art Pulaski, pledged that they would fight “to ensure working people have the basic job protections and the right to organize a union they deserve under the law”.
The purpose of AB 5 is to expand upon and clearly define a California Supreme Court decision known as Dynamex, which created a test to determine when a worker is an employee or an independent contractor. To hire a worker as an independent contractor a business must prove that the worker is 1) free from company control, 2) doing work not central to the company’s business, and 3) has their own business in the industry. If any of those conditions are not met, the worker is legally considered an employee. This clear definition of who is and is not an employee is a huge leap forward and sets a clear legal precedent that could improve the clarity and quality of labor laws in the U.S. if adopted on a wider scale.
This bill could provide an answer to the pleas for labor rights from workers in the gig economy not only in California but across the U.S. and around the world. The only question is whether this standard will be allowed to act as a shining example or if it will be crushed along with the hopes of thousands of workers across the globe for the sake of a profit margin dependent on skirting the law.
Joseph Doner - Political Editor