SACRAMENTO, Calif.-- California Gov. Gavin Newsom on Wednesday signed sweeping labor legislation that aims to give wage and benefit protections to ride-share drivers at companies such as Uber and Lyft and to as many as a million workers across other industries.
The hotly contested legislation dictates that workers can generally only be considered contractors if they are doing work that is outside the usual course of a company's business. The law codifies a 2018 state Supreme Court ruling and applies it to a wide range of state laws. It could upend the business models of companies that depend on armies of independent contractors, who aren't guaranteed employment protections like minimum wage and overtime.
The court set a three-prong test for companies to use when determining how to classify their workers. To be labeled a contractor, a worker must be free from control of the company; performing work "outside the usual course of the hiring entity's business"; and engaged in an independently established trade, occupation or business of the same nature as the work they are performing.
Uber has suggested it won't implement the new rules come Jan. 1, when the law is set to go into effect. It has joined Lyft and DoorDash in threatening to spend millions on a 2020 ballot measure if it can't negotiate other rules for its drivers with Newsom and unions.
While the Legislature has adjourned until next year, fierce lobbying and deal-making efforts are expected to continue in the meantime.
In a statement, Newsom called the bill "landmark legislation" and said, "A next step is creating pathways for more workers to form a union, collectively bargain to earn more, and have a stronger voice at work -- all while preserving flexibility and innovation." Lorena Gonzalez, the state assemblywoman who wrote the bill, said in a statement that "California is now setting the global standard for worker protections for other states and countries to follow."
Tech companies, including the ride-hailing giants, have tried unsuccessfully over the past year to secure concessions that would shield them from having to reclassify their workers, including holding talks with union leaders about potential compromises that would extend new perks to workers while preventing them from becoming employees. Newsom, a Democrat seen as friendly to both technology companies and labor, has publicly and privately urged a deal but so far hasn't been able to get one.
An Uber spokesman expressed the company's disappointment on Wednesday. "We've engaged in good faith with the legislature, the Newsom administration and labor leaders for nearly a year on this issue," he said in a statement, "and we believe California is missing a real opportunity to lead the nation by improving the quality, security and dignity of independent work."
Newsom said Wednesday that he would convene labor, business and legislative leaders to discuss how California could "support innovation and a more inclusive economy," by stepping in where the federal government had "fallen short," to grant workers the "right to organize and collectively bargain."
Private-sector unionization is generally governed by federal law rather than the states. But some labor advocates believe the exclusion of many ride-share workers from federal protections creates an opportunity for states like California to establish their own unionization system. Others are hopeful that the California Assembly itself, by forcing changes to companies' business models, could make it easier for workers to qualify as employees under federal labor law as well.
In the meantime, Uber has signaled it will keep aggressively defending its position that its drivers are not employees, even under the new law. "Just because the test is hard does not mean we will not be able to pass it," Uber chief legal officer Tony West told reporters last week.
A spokesman for Lyft said the company was hopeful it could work with the governor's office to "reach a historic agreement," but added, "if necessary we are prepared to take this issue to the voters to preserve the freedom and access drivers and passengers want."
The new law could also affect janitors, construction workers and home health aides, even though its effect on ride-sharing and meal-delivery drivers has seized the spotlight.
Those companies treat their workers as independent contractors who are paid on a per-ride basis and don't have benefits such as health insurance and paid leave.
The companies say the new law could force them to implement work shifts, a move that would eliminate the flexibility that workers enjoy.
Drivers themselves are divided on the issue, with many lobbying in favor of the bill and others expressing concern about losing the ability to choose when they work.
Uber and Lyft have proposed a third option that would set a base hourly wage for workers, set up a collective bargaining process and give them access to a "benefits fund" controlled by the companies that could provide things such as workplace injury protection and paid leave for certain employees.
The California Labor Federation, a sponsor of the legislation, is opposed to such a deal, arguing the companies should have to provide workers the full suite of benefits granted to employees in state law.
Information for this article was contributed by Josh Eidelson of Bloomberg News and by Kathleen Ronayne of The Associated Press.
Business on 09/19/2019