Lawmakers in California have passed a landmark bill that would make it much more difficult for companies such as Uber and Lyft to classify workers as independent contractors rather than employees.
The bill, which paves the way for workers in the so-called gig economy to get holiday and sick pay, has garnered attention across the US and beyond, largely owing to the size of California’s workforce.
Several Democratic presidential candidates have supported the measure, including the US senators Elizabeth Warren of Massachusetts, Bernie Sanders of Vermont and Kamala Harris of California.
Trade groups and “gig economy” firms that rely heavily on contractors have sharply criticised the bill. “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,” the ride-hailing company Lyft said in a statement. Uber did not immediately respond to a request for comment after US market hours.
Last week, Uber and Lyft proposed a ballot referendum that could be presented to California voters next year and would exempt drivers for ride-hailing services from the scope of the bill, known as AB5.
Uber, Lyft and the delivery firm DoorDash, which has also made freelance drivers the backbone of its business, earmarked $90m (£73m) for a planned November 2020 ballot initiative that would exempt them from the law.
San Francisco-based DoorDash, expressing its disappointment at the vote, said it was committed to a new law that would guarantee benefits and protections, including a minimum wage, for its delivery drivers.
The gig economy is based on temporary or freelance jobs. Often these are offered by app-based services like Uber or Deliveroo, where instead of a regular wage, workers get paid for the ‘gigs’ they do. If they aren’t out working, they aren’t getting paid.
Companies offering this kind of work argue that it provides people with a flexible way to be employed, whether that means doing some extra work on the side to fund studying, or to work around childcare demands.
A major drawback for workers though is the lack of protection and paid benefits such as holiday or sick pay. There are also suggestions that by the time some companies have taken a cut of payments for a service, workers aren’t making the minimum wage.
And the roles aren’t always as flexible as they first appear, with gig workers incentivised and put under pressure to work at times when a service is busier.
In 2018 the US Bureau of Labor Statistics reported that 55 million people in the US workforce were ‘gig workers’ – more than 35% of the market.
In the UK the gig economy more than doubled in size in the three years leading up to 2019, when it accounted for 4.7 million workers. Up to one in seven working-age adults in the UK – about 7.5 million people – have worked via a gig economy platform at some point.
AB5, which was sponsored by the California assemblywoman Lorena Gonzalez and is supported by the California governor, Gavin Newsom, passed the state senate with 29 votes in favour and 11 votes against. Newsom is expected to soon sign the bill into law.
“By approving AB5, the California legislature solidified our state’s position as the national leader on workplace rights, setting the standard for the rest of the country to follow,” the California Labor Federation said in a statement.
California is the most populous US state and is a leader in establishing policies that are adopted by other states.
The bill would codify a 2018 California supreme court decision in Dynamex Operations West Inc v superior court, that set out a new standard for determining whether workers are properly classified as independent contractors.
Under the measure, which would go into effect on 1 January, workers must be designated as employees instead of contractors if a company exerts control over how they perform their tasks or if their work is part of a company’s regular business.
The court said workers were a company’s employees under state wage laws when the company exercised control over their work, or they were integral to its business.