California Passes Opportunity to Work Act in AB-5 Bill
By: Danielle Dawson
Many California corporations like Uber and Lyft are unsure of their future business in the state amid concern over the implementation of a controversial worker classification bill, directly targeting the growing “gig” economy.
Assembly Bill 5 was written by San Diego Assemblywoman Lorena Gonzalez and signed by California Governor Gavin Newsom last month. The bill aimed to in place guidelines for distinguishing independent contract workers from employees, in order to combat worker mistreatment due to misclassification.
“Misclassification is running rampant and we have to say that if a company is using a worker as an employee in their basic course of business, they are an employee…and [have] the right to minimum wage and overtime, the right to basic protections like worker’s compensation and unemployment insurance and healthcare,” Gonzalez said in an interview in early July.
Under the new guidelines, businesses are required to use a three-part test to determine worker status, known as the “ABC Test.” This test states that a worker is considered an “independent contractor” if they: perform tasks outside from their hiring company’s main core of business, are able to operate without control by the hiring company, and are engaged in an independently established trade, occupation or business.
This test is nothing new in California. Prior to AB 5, the ABC Test was already considered existing state law, established in the decision of a 2018 California Supreme Court case, Dynamex Operations West, Inc. v. Superior Court of LA.
AB 5 aimed to codify this decision and provide clarity surrounding its implementation. However, the bill has since opened up a debate over the nature of employment in an economy increasingly reliant on gig work.
The bill directly targeted corporations like Uber and Lyft, app-based companies with a business model reliant on “gig” work. According to Gonzalez and supporters of the bill, like the California Labor Federation and Gig Workers Rising, companies are using worker status to denying certain benefits of employment, such as health insurance and minimum wage.
“Lyft didn’t give me a penny. They just apologized a thousand times for what happened,” a Lyft driver said to Vice’s publication Motherboard following being robbed and assaulted on the job. According to Motherboard, the driver lost $1,270 in cash and stolen property, excluding the added costs from hospital bills and income lost over the duration of the driver’s subsequent recovery. He was not given workers compensation.
The ride-share companies, however, believe that their workers are properly classified as independent contractors, arguing that the drivers’ work operates outside the companies’ usual course of business and passes the ABC test.
“Several previous rulings have found that drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces,” Tony West, Uber’s chief legal counsel, said to reporters in a press call.
West continued saying that, they will not take any steps to change their workers’ status when the bill goes into effect Jan. 1 of 2020. “Because we continue to believe drivers are properly classified as independent, and because we’ll continue to be responsive to what the vast majority of drivers tell us they want most — flexibility — drivers will not be automatically reclassified as employees, even after January of next year,” West said.
The ride-share company believes that their inaction is still in compliance with the new law, citing that it is simply applying a harder test on certain industries and does not explicitly state that drivers are considered employees.
Drivers for these companies, while they could benefit from reclassification, are divided over the issue — many in agreement with Uber that reclassification would disable the flexibility and independence over their work that they currently have.
“I have the ability to work whenever I want to, for however long I want to,” argued Lakeside Lyft driver, Garry Smith, in opposition to reclassification during a press conference on Sept. 9. “I don’t have a set schedule. I don’t have to clear time off by anybody else. I’m independent.”
“The ability to be my own boss is critical for me,” Ana Bradford, another Lyft driver, said during the same press conference. “I choose when I work, where I work, and when I can stop working.”
This decreased independence under the new, stricter guidelines has other fields, including the entertainment industry, also worried about the future of employment.
According to Rick Genow, an entertainment lawyer who spoke with The Hollywood Reporter, the element of the ABC test that requires an independent contractor to perform duties outside of the usual course of company business could potentially prevent performers from doing freelance work and from operating independently of a singular company, leaving an “economic impact [that] would be somewhat devastating to both talent and the studios.”
Various exemptions from the new test have been granted to certain professions including barbers, architects, real estate agents and lawyers. However, other affected gig-based industries, such as Hollywood and ride-share services, have not been given exemptions and are expected to comply with the law when it goes into effect next year.