California lawmakers facing the shifting definition of work have approved sweeping legislation designed to offer many contract employees new cover and benefit protections, but technology giants Uber and Lyft pledged to keep fighting the changes, maybe by bankrolling a costly struggle on the 2020 ballot.
The measure, passed Wednesday, that’s heading into Democratic Gov. Gavin Newsom summarizes a three-part test which makes it harder for businesses to classify workers as independent contractors that aren’t entitled to minimum wage and benefits like workers compensation.
Uber has argued that forcing its drivers to become workers would upend a business model that’s built on flexibility. General counsel Tony West suggested to reporters that the ride-hailing firm will not begin treating its employees as workers come Jan. 1, rather defending its version if it faces legal challenges.
“Just because the test is hard does not mean we will not be able to pass it,” he explained.
Newsom has vowed to sign the measure, but his office expects to bring ride-hailing and meal delivery firms to the table with labour unions to negotiate another set of rules for employees who pick up tasks in their own schedules at the so-called gig market.
The freshman governor faces a test of his ability to broker a compromise between strong interest groups in Silicon Valley and organized labor. Steve Smith of the California Labor Federation, a sponsor of the legislation, said the firms so far have not made acceptable proposals.
“We’re committed to creating the conditions for (negotiations) to happen,” Newsom spokesman Nathan Click stated.
If Newsom signs the legislation, it could have national implications as politicians and companies confront the changing nature of work.
New York Gov. Andrew Cuomo, a Democrat, has indicated interest in pursuing a similar step, and nearly all of the Democratic presidential contenders have provided similar proposals at the national level.
“It’s forced the nation to take a look at what the future of work is going to look like,” Democratic Assemblyman Ian Calderon of Whittier stated in supporting the bill.
The measure would enshrine in legislation a 2018 California Supreme Court decision which makes it harder for businesses to classify workers as independent contractors rather than employees. While the court’s decision has established legal precedent because this past year, the legislation offers enforcement tactics to the nation and to city lawyers, who could sue businesses they think are failing to complywith
But Uber, Lyft and delivery companies including DoorDash and Postmates are not prepared to concede.
Uber and Lyft have dumped $60 million into a committee to get a ballot measure next year if Newsom does not broker a deal. They’ve said the ballot measure would set a base hourly wage, give employees access to benefits they could take with them to other businesses and permit drivers to collectively bargain without making them workers.
DoorDash, the meal delivery company, also has pledged $30 million.
Lyft spokesman Adrian Durbin wouldn’t comment on if Lyft shares Uber’s position it won’t reclassify its employees come Jan. 1.
“We are fully prepared to take this issue to the voters of California to preserve the freedom and access drivers and riders want and need,” Durbin said in a statement.
The legislation is probably of extreme interest to the companies’ investors — both Uber and Lyft are publicly traded. Wedbush analyst Daniel Ives wrote in a note to investors that the company expects gig market organizations to push back and find middle ground.
The step lays out a three-prong evaluation to determine if employees can be tagged as contractors: The employee has to be free from control of the business, perform work “outside the usual course of the hiring entity’s business” and be engaged in an independently established trade, occupation or business of the identical nature of the job they are performing.
“This isn’t perfect, but I think this goes a long way to protecting workers, legitimate small businesses, legitimate businesses that play by the rules, and we, as taxpayers, that have to clean up the mess when these businesses don’t provide enough for their workers,” said the bill’s author, Democratic Assemblywoman Lorena Gonzalez, her voice shaking with emotion.
Her laws had been the target of intense lobbying efforts, not only from gig market businesses. Since it would affect all job sectors, many have successfully pushed for exemptions.
Jobs excluded in the new evaluation include dentists and physicians; accredited attorneys, architects, accountants and engineers; commercial fishermen; travel agents, marketing consultants, graphic designers, grant writers and others.
Critics say by writing a lot of exceptions, the Legislature is picking winners and losers.
Associated Press journalist Tom Krisher in Detroit contributed to this story.