On September 10, California became the first state to change its laws regarding how workers in certain service industries are legally regarded. See, e.g., Sean Symkowski, “California bill passes to classify Lyft, Uber drivers as employees,” C-Net, Sep. 11, 2019, at https://www.cnet.com/g00/roadshow/news/california-ab5-uber-lyft-employees/?i10c.ua=4&i10c.encReferrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8%3d&i10c.dv=13. The California legislation, AB 5, is reported to be a “landmark bill…that requires [rideshare] companies to treat contract workers as employees, a move that could reshape the gig economy and that adds fuel to a [protracted] debate over whether the nature of work has become too insecure.” Kate Conger & Noam Scheiber, “California Bill Makes App-Based Companies Treat Workers as Employees,” The New York Times, Sep. 11, 2019, available at https://www.nytimes.com/2019/09/11/technology/california-gig-economy-bill.html. The new bill has evoked quite a bit of controversy among legal and political insiders.
The recent bill overwhelmingly cleared the California Senate by a vote of 92-11 and passed the state’s General Assembly by a margin of 56-15. See, e.g., Dave Lee, “Uber says ‘gig economy’ law will not hurt the business,” BBC, Sep. 11, 2019, at https://www.bbc.com/news/technology-49670849. Governor Gavin Newsom had previously endorsed the policy and has announced his intent to sign it into law, making the bill’s consequences a worthwhile consideration among analysts. See, e.g., Kate Conger & Noam Scheiber, supra. The bill is expected to go into effect on January 1, and under its provisions, “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.” Id. In addition to its domestic implications, AB 5 is considered noteworthy because it “may influence other states. A coalition of labor groups is pushing similar legislation in New York, and bills in Washington State and Oregon that were similar to California’s but failed to advance could see renewed momentum.” Id.
In California alone, the new policy will impact at least one million workers. See id. The bill “codifies and extends” a state supreme court ruling from 2018, and its passage underscores efforts to increase worker protections. See id. However, efforts to broaden the scope of workers’ rights have arisen at the same time as businesses are increasingly relying on a so-called “gig economy,” so the interests of ride share companies may be at odds with workers’ rights groups. See, e.g., Dave Lee, supra. It is unclear what course the businesses that are affected by the new law will take. According to a press release from Uber’s Chief Legal Officer (CLO), Tony West, AB 5 “does not automatically reclassify any rideshare drivers from independent contractors to employees.” Tony West, “Update on AB5,” Uber Newsroom, Sept. 11, 2019, at https://www.uber.com/newsroom/ab5-update/.
West contends that the bill “does not provide drivers with benefits, nor does it give drivers the right to organize. In fact, the bill currently says nothing about rideshare drivers.” Id.
Rideshare companies have spent $90 million on a ballot initiative in California that would allow drivers to remain independent contractors and would be decided by voters in 2020. See, e.g., Kate Conger, “Uber, Lyft and DoorDash Pledge $90 Million to Fight Driver Legislation in California,” The New York Times, Aug. 29, 2019, at https://www.nytimes.com/2019/08/29/technology/uber-lyft-ballot-initiative.html. Before Governor Newsom signed AB 5 into law on September 18, at least one class action lawsuit was filed in 2013 against a rideshare company for allegedly incorrectly classifying its workers. See, e.g., Noam Scheiber, “New Lawsuit Against Uber Is Set to Test Its Classification of Workers,” The New York Times, Sep. 12, 2019, at https://www.nytimes.com/2019/09/12/technology/uber-drivers-california.html. The amended version of AB 5, which recently passed, also allows city attorneys in California to sue rideshare companies in order to enforce the proposed changes in worker classifications. See, e.g., Joe Fitzgerald Rodriguez, “Last-minute AB5 amendment empowers city attorney to sue Uber for labor violations,” San Francisco Examiner, Sep. 10, 2019, at https://www.sfexaminer.com/news/last-minute-ab5-amendment-empowers-city-attorney-to-sue-uber-for-labor-violations/. The state attorney general and city attorneys for areas with populations of over 750,000 are entitled to sue for injunctive relief, and commentators speculated that this provision was written with San Francisco in mind. See, e.g., id.
Regardless of whether courts accept the rideshare companies’ argument that their workers are not covered by AB 5, or whether adjudicators defer to the apparent legislative intent of AB 5, legal battles are expected. See, e.g., Shirin Gaffary, “Uber’s baffling claim that its drivers aren’t core to its business, explained,” Vox, Sep. 16, 2019, at https://www.vox.com/recode/2019/9/16/20868916/uber-ab5-argument-legal-experts-california. Some analysts believe that the entities arguing that their workers are exempt, which is based on the premise that such drivers are not part of the “usual course” of their businesses, are simply attempting to buy time and improve their public images. See id. It remains to be seen how courts will resolve legal disputes; despite what many see as clear legislative language, one arbitrator determined that a rideshare worker “was not entitled to employee pay and benefits” in 2018. See id. To wit, the arbitrator declared that the business in question “was not, precisely speaking, in the business of providing rides, any more than a broker is in the business of providing property.” See id. Instead, it was held that the company’s business was to provide the “possibility” of a ride, which the arbitrator felt was an important legal distinction. Additional litigation should be anticipated, and some 60,000 arbitration cases have been mounted against one rideshare provider. See id.
To resolve legal disputes over the meaning and enforcement of AB 5, factfinders may need the assistance of expert witnesses. Those who specialize in employment matters, the transportation industry, and economics may be able to offer information and persuasive analysis to help adjudicators make their determinations. The stakes are quite high, and the outcomes have been somewhat mixed in the past. See, e.g., id.
Members of the legal community have anticipated increased disputes over the scope of AB 5 and its intended impact on the so-called “gig economy.” Experts may play an instrumental role in addressing the issues that arise in specific situations and identifying larger patterns. Debates may ensue over industry standards and what legislative provisions apply to a particular set of facts. Some commentators have expressed admiration for the rideshare industry’s claims, arguing that their approach leaves room to “reopen legislation negotiations with California politicians.” See id. Others have claimed that the legislative intent and effect are clear, and that the businesses’ arguments are untenable. See, e.g., id. The results of AB 5’s passage remain to be seen, and the scope of the new law’s applicability appears to be hotly-contested in the foreseeable future.