Not everyone who works in California is an employee—legally speaking. Over the years, companies have come up with various alternative titles for the people who work for them: taskers, consultants, independent contractors, 1099-ers, even app users—all labels that let companies circumvent labor laws and union protections, by deeming workers to be “independent” or “self-employed.” Uber, Lyft, TaskRabbit, and a host of other gig economy services rely on these “independent contractors” to fuel their profits. But now, California lawmakers are considering a bill that could upend the gig economy’s signature business model, by reclassifying many independent contractors as employees.
Assembly Bill 5, which passed the state Assembly in May 59 to 15 and now awaits a vote in the Senate, would provide clear guidelines to determine who is and is not an employee—and thus who is entitled to labor protection and benefits under state laws. AB5 would codify a recent landmark state court ruling, Dynamex Operations West, Inc. v. Superior Court of Los Angeles, which established a three-part test to determine whether someone would be considered an independent contractor or an employee of a company under California’s labor law. That ruling’s “ABC test” determines whether an individual is an independent contractor by asking (a) if the individual works independently, (b) if the individual performs work outside the firm’s usual operations, and (c) if the individual is “customarily engaged in an independently established trade, occupation, or business of the same nature” as the job they do for the company. Enshrining this legal standard could accord employee status to most rideshare drivers, as well as many others who work on a contract or project basis, such as musicians, plumbers, and delivery drivers.
Because contract workers are not employees, they enjoy few of the labor protections many of us take for granted. Under AB5, gig workers would be able to establish a formal employment relationship with their employer—whether that’s a contracting agency or digital platform—which would subject that employer to California’s wage and hour laws and other basic work standards, as well as unemployment insurance and payroll taxes. That might enable many gig workers to move toward a sustainable career, with overtime pay and minimum-wage protections, along with paid family leave, disability insurance, and the right to collectively bargain.
By providing the protections that come with employee status, AB5 would also address an erratic workflow that currently forces many drivers into stressful, long hours and severe income volatility.
Rebecca Smith, director of work structure at National Employment Law Project, has written extensively on how “flexible” working conditions often lead to instability for gig workers. She dismissed the industry’s argument that AB5 would force workers to lose flexibility as gig workers, writing in an e-mail, “Some businesses would like workers to believe that their jobs will be threatened if businesses have to be accountable.… They tell workers that somehow it’s that law that they can either be ‘employees’ or have some say over their hours. That’s just false: Policies around flexible work are choices that businesses make. No law forces them to take that away from workers.”
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“We see this as really kind of a crucial precedent in determining how labor relations are going to be managed moving into the future,” says Brian Dolber of Rideshare Drivers United, which represents Uber and Lyft drivers across Los Angeles. Labor advocates hope AB5 helps reverse a downward spiral in labor standards as more workers are improperly labeled, and subsequently exploited, as “contractors.”
The campaign for AB5 also comes amid rising financial and labor turmoil in the rideshare world, punctuated by the disappointing performance of Uber and Lyft’s initial public offerings, which, like many leading startups, failed to live up to the media hype. And the companies face trouble beyond Wall Street as well: Frustrated with harsh labor conditions, rideshare drivers’ groups around the world organized a wave of wildcat strikes on May 8, spanning about 10 cities from New York to California, as well as cities in Australia and the United Kingdom.
The underlying case law that AB5 would codify does not deal directly with rideshare drivers, but does reflect the frustrating constraints that come with independent contractor status. In the Dynamex case, two delivery drivers charged that the company had illegally classified them as independent contractors. Dynamex controlled their wages and working conditions, and, while drivers did have some choice over their delivery jobs, they were still required to “complete all assigned deliveries on the day of assignment.” Because of all this—and notwithstanding the significant financial benefits that redounded to the company by keeping them as independent contractors—the court found that the drivers were indeed employees.
The financial incentive to exploit so-called independent contractors is baked into the gig economy business model, and Uber and Lyft have perfected a system of accumulating a massive workforce through their apps, without employing a single driver. Although drivers are dispatched through the same platform, rely on the app’s network to pick up ride assignments at variable wage rates, and are constantly monitored and graded on their performance through the app’s algorithms, they lack employment status and all the protections that come with it. Despite being legally “self-employed,” many complain of having little control over their working conditions, and being subjected to unilateral firing or “deactivation” based on arbitrary performance evaluations.
AB5 is therefore designed to standardize labor protections on platforms and other “on demand” and contract-based sectors, and empower gig workers—ranging from rideshare drivers to dog walkers, exotic dancers to housekeepers—to work toward collective bargaining.
“This is the first step in raising the standards for us,” says LA-based Uber driver Linda Valdivia. As a member of the Mobile Workers Alliance (MWA), she and her coworkers’ focus is on achieving decent wages after years of dwindling revenues from Uber’s constantly fluctuating fares. After three years as a rideshare driver, she says that the fares she earns today are typically only about half of what she used to earn. While MWA supports AB5, it is also pushing for a $30-per-hour wage for drivers so that, in addition to the benefits of regular employment, their rideshare job will provide a sustainable livelihood. “We are already determined to keep on fighting…. They have the money,” Valdivia says. “They are making billions of dollars, they have the money to pay us that.”
SEIU, the service workers’ union that provides funding and support to MWA, backs AB5 as a step in its long-term organizing strategy as it organizes platform labor at the grassroots through MWA and Gig Workers Rising, though the union remains wary of ”carve outs” for certain sectors, like rideshare, that industry groups may try to slip into the final version of the bill. SEIU California State Council President Bob Schoonover has stated that its push for AB5 is part of a larger process involving “government, labor, private, and nonprofit sectors” and pressing companies to “find innovative ways” to improve working conditions—indicating that the union is seeking to negotiate more comprehensive labor protections for the gig economy, beyond employee status.
AB5 would build upon several earlier attempts across the country to regulate rideshare companies at the local level. In New York City, where Uber is blamed for eroding jobs and labor conditions in the traditional yellow cab industry, the Taxi and Limousine Commission wrangled for years with Uber and Lyft to compel the companies to submit to licensing rules and, more recently, a citywide wage floor. Other cities, and some European governments, have tried to regulate gig work and freelance labor with protections against wage theft and exploitation. But California’s bill could be the first legislation that directly attacks the exploitative labor structure of Uber, Lyft, and the other Silicon Valley moguls.
Yet, in Washington, Uber and Lyft have had a relatively easy ride. The rideshare sector got a green light in May from the National Labor Relations Board’s Trump-appointed General Counsel Peter Robb, whose office issued a memorandum declaring that Uber and Lyft drivers were in fact independent contractors and therefore lacked collective-bargaining rights. In one case Robb’s office analyzed, Uber was accused of having “provided unlawful assistance to or unlawfully dominated” a labor organization in New York (Uber launched a worker’s group called Independent Drivers’ Guild in 2016, in collaboration with the International Association of Machinists and Aerospace Workers). Robb’s office responded by emphasizing drivers’ “entrepreneurial independence,” underscoring later that they “had significant entrepreneurial opportunity by virtue of their near complete control of their cars and work schedules, together with freedom to choose log-in locations and to work for competitors of Uber.”
The Labor Department also weighed in on gig work in April with an opinion letter that declared that workers who found gigs through one unnamed on-demand household services company were independent contractors, because the company did not exert a significant enough degree of control over the workers.
As the Trump administration lets gig bosses off the hook, the rideshare giants have been aggressively lobbying state lawmakers across the country for “carve outs” from existing labor laws, which in some states have already exempted tech-driven work platforms from critical regulations for social benefits, minimum wage and overtime, and the right to organize.
With AB5, California seems to be finally reining in Silicon Valley’s gig economy unicorns. Saba Waheed, research director of University of California, Los Angeles, Labor Center says, “California is also home to a lot of these tech companies, and they’ve been given a lot of space to thrive and innovate and nobody wants to disrupt and be that person who stops a lot of these huge changes going on.”
The prospect of suddenly becoming the official, rather than virtual, boss of tens of thousands of rideshare drivers has sent Uber and Lyft executives into a panic. They warned in a San Francisco Chronicle commentary that the bill would stifle the “flexibility” that enables platforms to optimize their workflow, and the additional labor costs of putting drivers on an official payroll would seriously harm their business (potentially raising overhead costs by 20 to 30 percent).
As the bill moves forward, Uber and Lyft are stoking fears among drivers that gaining employee status would kill the supposed freedom they now enjoy as so-called entrepreneurs. The companies have sent push notifications to drivers to advocate against the bill, and have even paid drivers to show up to anti-AB5 protests. But Valdivia sees Uber and Lyft’s warnings about scheduling flexibility as fearmongering: “It’s a big lie, because the AB5 does not address the flexibility at all. We are in control of that,” she said, adding, “We are going to keep it, and we are going to enjoy it.”
So far, the tech-based “gig economy” still occupies just a small percentage of the whole workforce. Yet the controversy surrounding how to regulate it reveals how technology and globalization are affecting all forms of work, further distancing us from the companies we work for, and the people we work alongside. AB5 could make state law finally reflect the reality of today’s on-demand service economy: You might not have an official boss, you might get paid for a project instead of by the hour, or you might work for an app instead of a human, but you still have rights as a worker.
Ken Jacobs, chair of the University of California, Berkeley, Labor Center, points out that the debate over AB5 “has been turned into a discussion around gig work, [but] it goes well beyond that.” In terms of workers whom the bill would cover, “we’re talking about workforces that are disproportionately people of color, heavily Latino, and disproportionately…immigrant workers,” all of whom as gig workers are precariously employed and excluded from standard labor law.
The battle to curb Uber and Lyft’s exploitative practices, Dolber says, resonates with many workers who feel exhausted and disempowered at work: “Across the economy, in part because of the flexibility that technology enables, we’re seeing people having to work multiple jobs and stitch together a salary from multiple sources…large companies like Uber and Lyft are capitalizing on the precarity that everyone is experiencing.”
After passing the California Senate’s Public Employment and Retirement Committee earlier this month, AB5 is expected to undergo more revisions in the Appropriations Committee before coming up for a vote. If passed, it could land on Governor Gavin Newsom’s desk in September. He has not signaled whether he’d sign it, only that he would encourage lawmakers on both sides to “compromise.”
Whether or not it becomes law, AB5 has already amplified workers’ demands for accountability from the giants of the gig economy. The question now is, Will they be heard?