California Is Changing The Rules For Contract Workers And The Gig Economy

With Meghna Chakrabarti

Who’s an employee and who’s a contract worker? California is rewriting the rules.

Carolyn Said, business reporter covering the on-demand economy for the San Francisco Chronicle and SFGate. (@CSaid)

Lorena Gonzalez, Democratic California state assemblywoman representing the 80th District. Author of Assembly Bill 5. (@LorenaAD80)

Diane Mulcahy, lecturer at Babson College who teaches an MBA class on the gig economy. Author of the book, "The Gig Economy." (@dianemulcahy)

San Francisco Chronicle: "AB5 gig work bill: All your questions answered" — "Groundbreaking new California legislation impeding many companies from claiming workers are independent contractors takes effect in 2020. AB5 passed the Senate and Assembly last week, and Gov. Gavin Newsom has indicated he will sign it. Here are answers to questions about the gig work bill.

"Q: At the stroke of midnight on Dec. 31, will every Uber and Lyft driver in the state, plus all the other affected workers, turn into employees, like Cinderella’s coachmen transforming back into mice?

"A: Nope. As much as some might want a gig economy magic wand, it’s a lot more complex than that.

"Q: So what does AB5 actually do?

"A: AB5 codifies, clarifies and grants exemptions to a 2018 California Supreme Court decision called Dynamex. Both AB5 and Dynamex make it harder for companies to label workers as independent contractors. They use an 'ABC' test that says workers are employees if (A) they perform tasks under a company’s control, (B) their work is integral to the company’s business and (C) they do not have independent enterprises in that trade. It takes effect Jan. 1."

Los Angeles Times: "Sweeping bill rewriting California employment law sent to Gov. Newsom" — "California lawmakers rewrote the rules of employment across a wide swath of industries Wednesday in legislation that could grant hundreds of thousands of workers new job benefits and pay guarantees.

"After vigorous debates over what occupations should be exempted, Assembly Bill 5, which curbs businesses’ use of independent contractors, gained final approval in the state Senate and the Assembly and was sent to Gov. Gavin Newsom, who has pledged his support.

"The 6,700-word bill is one of the most controversial of the year. It could upend the relationship between workers and bosses across businesses as varied as ride-hailing tech giants, construction, healthcare, trucking, janitorial services, nail salons, adult entertainment, commercial fishing and newspapers."

New York Times: "New Lawsuit Against Uber Is Set to Test Its Classification of Workers" — "Uber insisted on Wednesday that it may not have to reclassify its drivers as employees despite a newly passed California bill that would appear to require just that. Hours later, the ride-hailing company learned it would soon get a chance to test its argument in court.

"A longtime legal antagonist filed a class-action suit on behalf of drivers in federal court in California on Wednesday, accusing Uber of wrongly classifying drivers under the state’s employment test.

"In the complaint, the lawyer, Shannon Liss-Riordan, said Uber had failed to pay its California drivers the minimum wage, overtime and expense reimbursements that they are entitled to as employees. The complaint asked the court to issue an injunction requiring the company to reclassify drivers."

Wall Street Journal: "Uber Vows to Fight California Legislation on Gig Economy" — "California lawmakers passed landmark employment legislation that challenges the business model of “gig-economy” companies such as ride-hailing giants Uber Technologies Inc. and Lyft Inc. But Uber immediately signaled defiance, saying it didn’t plan to change its practices in response to the measure.

"The legislation, which intends to force companies to reclassify certain contract workers as employees, is considered a serious threat to Uber and Lyft, already losing billions of dollars a year combined, as their business models have relied on flexible labor and minimal worker costs.

"The bill’s passage in the state Assembly on Wednesday, after the state Senate’s passage the night before, reflects the degree to which the large Democratic majority in Sacramento has increased scrutiny of tech companies in recent years, as well as the strength of labor unions in the state.

"Given California’s size and history of creating influential business regulations, it also is the first significant step in a new paradigm for a changing workforce, fueled by people who have forgone benefits for the sake of flexibility and occasional incentives."

Los Angeles Times: "A bill giving workplace protection to a million Californians moves one step closer to law" — "A measure to curb the widespread use of independent contractors across the California economy moved closer to final passage in the Legislature on Friday even as Uber, Lyft and other gig economy companies mounted a fierce lobbying campaign to sidestep its reach.

"The landmark legislation, which could set a precedent in a national battle to improve pay and benefits for low- and middle-wage workers, would change the employment status of more than a million Californians.

"Janitors cleaning downtown office buildings, truckers loading goods at the ports of Los Angeles and Long Beach, construction workers building new homes, manicurists, medical technicians, nightclub strippers and even software coders would be among scores of occupations offered protection against long-documented workplace abuses.

"Assembly Bill 5, which writes into law a strict test before companies can classify workers as contractors, cleared a key fiscal committee Friday in the state Senate. It is expected to pass both houses of the Legislature before lawmakers adjourn Sept. 13."

Stefano Kotsonis produced this hour for broadcast.