Capitol Alert

California seeks to make Uber, Lyft drivers employees with passage of new California labor rules

California is poised to enact a proposed law to expand which workers are entitled to employee benefits after the state Assembly voted Wednesday to send the bill to Gov. Gavin Newsom, who says he supports it.

Supporters argue the bill will end rampant misclassification of workers as independent contractors, who aren’t guaranteed employee rights like minimum pay and compensation for injuries sustained on the job.

“It makes sure that the one million independent contractors in California get the wages and benefits they deserve,” said Assemblywoman Lorena Gonzalez, the San Diego Democrat who authored the bill.

The new rules will affect a wide range of professions and trades that are still pushing for exemptions, from truckers to health care workers.

But the loudest voices raising concerns about the bill have been gig economy companies. Ride-share companies Uber and Lyft and delivery service DoorDash have pledged to spend a combined $90 million to take the issue to voters in 2020 if they don’t secure some relief from the new employee classification test.

Immediately after the bill’s passage, however, Uber said the company doesn’t agree that drivers must now become employees.

Despite the concerns ride-share companies have voiced about the new rules and the millions of dollars they’re committing to the ballot measure, Uber’s chief legal officer Tony West said the company will continue treating drivers as independent contractors.

He said the company is prepared to defend its position in court to avoid damage to its business model.

“Just because the test is hard doesn’t mean that we won’t be able to pass it,” he told reporters on a call Wednesday afternoon, but added that the outcome isn’t guaranteed. “If we go through a process where these cases are litigated… and we lost and drivers then become employees, then there would be costs that go along with that.”

The Assembly passed the bill 56 to 15, sending it to Newsom’s desk.

The legislation codifies a 2018 California Supreme Court decision known as “Dynamex” that institutes a new test for who is classified as an employee. The bill carves out exemptions from the new rules for dozens of professions, including lawyers, real estate agents and dentists. Newspapers also secured an eleventh-hour exemption for their delivery workers through a separate bill, which will give them a one-year break from the rules.

Lawmakers acknowledged many more industries and worker groups are still seeking exemptions and said they will likely continue negotiating into next year. But in the meantime, Democratic lawmakers argued the bill will help workers and give important clarity to the industries who did secure an exemption.

“If we don’t pass this bill, there are no exemptions,” said Assemblyman Ian Calderon, D-Whittier, because Dynamex is “already the law of the land.”

Newspapers could get a one-year reprieve from the new labor rules that would have forced companies to treat newspaper carriers as employees under a bill amended Tuesday evening.

Gonzalez announced the last-minute changes just before the deadline to amend bills before lawmakers break for their year-end recess Friday.

“Due to demands made in the Senate regarding the Dynamex decision’s implications for the newspaper industry, our office has amended Assembly Bill 170 to allow for a one-year delay in implementation for newspapers delivery services,” the San Diego Democrat said in a statement. “While I personally disagree with this delay, I’m willing to allow the newspaper industry the additional year to comply if it means those delivery drivers and nearly a million other misclassified workers are provided the minimum wage, benefits and workplace rights of Assembly Bill 5.”

Newspaper companies said classifying carriers as employees will threaten their business model and imperil papers already under financial stress.

Many of the industries that secured exemptions lobbied hard on the measure, spending millions of dollars to shape AB 5 and other measures in the first half of the year.

Assembly Republican Leader Marie Waldron of Escondido criticized the bill’s “carve-outs for the trade groups with the best lobbyists,” arguing many others have been left behind.

Assemblyman Jay Obernolte, R-Big Bear, said he wouldn’t have been able to start his own business as a college student under the bill.

“It stifles innovation and entrepreneurism here in California,” Obernolte said. “I’m tired of hearing people say that this bill empowers workers. This bill disenfranchises workers.”

Gonzalez said the bill will help even the playing field for businesses that are treating their workers properly

“We wanted to strike a balance, a balance that protects workers and protects small businesses,” Gonzalez said. “This isn’t perfect, but this bill goes a long way toward protecting workers.”

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Sophia Bollag covers California politics and government. Before joining The Bee, she reported in Sacramento for the Associated Press and the Los Angeles Times. She grew up in California and is a graduate of Northwestern University.
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