California Governor Supports Bill That Could Upend Uber, Lyft Model

California Gov. Gavin Newsom (D) has come out in support of AB-5, legislation that would reclassify many gig economy workers from independent contractors to employees, guaranteeing them labor protections and benefits and potentially upending the business models of tech companies like Uber and Lyft.

In an opinion piece in The Sacramento Bee on Monday, which was Labor Day, Newsom said he was proud to be supporting Assembly Bill 5 , which details the conditions under which a worker should be considered an employee and therefore entitled to benefits like a minimum wage, unemployment and disability insurance, and a right to form a union.

Our economy has stopped working for working people ... Corporate profits have gone through the roof while worker pay has remained in the basement, Newsom wrote in the piece. Contributing to this imbalance is the misclassification of workers, where companies eager to save on labor costs identify workers as independent contractors rather than employees.

Rideshare companies Uber and Lyft have hundreds of thousands of drivers in California, who are currently considered independent contractors. The companies have been lobbying against the legislation , as their bottom lines would be dramatically affected by having drivers newly classified as employees for whom theyd have to pay additional benefits and protections.

Hundreds of Uber and Lyft drivers with the organizing group Gig Workers Rising protested throughout California last month, demanding AB-5s passage and a union for drivers.

The legislation overwhelmingly passed in the Assembly in May and is set to next be voted on in the state Senate, after which it will go to Newsoms desk.

Putting power in the hands of working people has never been more critical than now.

We must hold true to our values and give a real voice to all workers everywhere.https://t.co/qaPkFzksLy

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Putting power in the hands of working people has never been more critical than now.

We must hold true to our values and give a real voice to all workers everywhere.https://t.co/qaPkFzksLy
Gavin Newsom (@GavinNewsom) September 3, 2019

Exactly how the law would affect rideshare companies and their drivers when applied in practice is still unclear. The legislation is based on a 2018 California Supreme Court decision in the case of Dynamex Operations , which established an ABC test for classifying workers as employees.

With AB-5 expected to pass, Uber, Lyft and other companies have committed tens of millions to back a ballot initiative , which would push a separate classification for rideshare drivers.

The companies have proposed providing certain protections that drivers have been demanding, like a minimum pay floor, as well as supporting sectoral bargaining, which would allow drivers across the industry to join together and negotiate better conditions from their companies.

In their push to keep drivers as independent contractors, the companies have also been spreading the idea that if drivers were made employees, they would lose their flexible scheduling.

One driver organizer, Annette Rivero, told TechCrunch in August that there was no truth to the companies claim that the legislation would affect drivers flexibility.

A Lyft spokesperson acknowledged to HuffPost that there was nothing explicitly in the law that would affect drivers flexibility, but added that the practical reality was that due to the bigger financial burden of having drivers as employees, the companies would likely not maintain scheduling flexibility.

Asked what Newsom would be willing to support in potential future talks with Uber and Lyft around how their drivers were classified, the governors office told HuffPost they wouldnt speculate on hypotheticals, adding that the governor has made his priority clear fairness for workers, higher wages, meaningful benefits, and the ability to organize.