California Passes Landmark Bill Requiring Contract Workers To Be Labeled As Employees (#GotBitcoin)
Despite objections from Uber and Lyft, Gov. Gavin Newsom has said he would sign labor bill that could reshape the gig economy. California Passes Landmark Bill Requiring Contract Workers To Be Labeled As Employees (#GotBitcoin)
California passed landmark employment legislation that challenges the business model of such “gig-economy” companies as ride-hailing giants Uber Technologies Inc. and Lyft Inc., some of the brightest stars in Silicon Valley over the past decade.
The proposed law, which intends to force companies to reclassify certain contract workers as employees, passed in the Democrat-led state Assembly Wednesday with a preliminary tally of 56 in favor and 15 opposed. The bill passed the state Senate in a 29-11 vote Tuesday night along party lines, with the chamber’s Republican caucus casting the no votes. Gov. Gavin Newsom, a Democrat, has said he would sign the bill if it gets to his desk.
Uber and Lyft have said the proposed law could upend their businesses and lobbied to change the bill. Gov. Newsom, in an interview Tuesday, said he remains personally involved in talks with Uber, Lyft and other gig-economy companies that have sought exemptions from the measure, known as Assembly Bill 5, as well as some of the unions supporting it.
“As it relates to Uber, Lyft, DoorDash, others, some of the gig platforms, these remain ongoing negotiations, and regardless of what happens with AB5, I am committed, at least, to continuing those negotiations,” Mr. Newsom said.
The governor said it was in the best interest of the state to “stay at the bargaining table, to continue to negotiate” and that talks will continue even though a deal wasn’t reached with the companies during this year’s legislative session.
“By no means this delay is a denial, and I’m fully committed—and expressed that to all sides—fully committed to continuing,” he said. “Not jump-starting, not-reconvening.”
In a statement following the vote in the state Senate, Lyft said it was ready to begin a ballot-measure fight next year to win provisions to exclude it from the law.
“Today, our state’s political leadership missed an important opportunity to support the overwhelming majority of ride-share drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits,” a Lyft spokesman said. “The fact that there were more than 50 industries carved out of AB5 is very telling.”
Together with food-delivery company DoorDash Inc., Uber and Lyft last month threatened to spend $90 million on a ballot measure next year.
Uber and Lyft have been negotiating with lawmakers and the state’s powerful unions in search of a change to the bill, particularly an exemption, in exchange for certain concessions. Their lobbying efforts have been to no avail, even as other industries succeeded, underscoring the strength of labor unions and the degree to which the large Democratic majority in Sacramento has increased scrutiny on tech companies in recent years.
The proposed law, which was introduced last December and would take effect Jan. 1, 2020, would reclassify workers in a range of other industries from trucking to janitorial services to music workers.
The bill codifies a 2018 California Supreme Court decision that set new standards for classifying people previously considered independent contractors as employees. Some experts expect other states to follow suit given California’s economic size and its precedent of creating influential business regulations.
As employees, ride-share drivers would be entitled to benefits such as a minimum hourly wage and workers’ compensation. But the companies have argued the bill would take away much of the flexibility of drivers, who now work whenever they want and can earn more when demand jumps. And some gig-economy executives have indicated they may challenge the law.
The approval of labor unions will be necessary to move forward with any kind of exemption. Mr. Newsom said he was meeting this week with the national leadership of Service Employees International Union, one of the state’s most powerful unions, and planned on continuing discussions with labor leaders. The governor appointed SEIU President Mary Kay Henry as a co-chair of his Future of Work Commission, which is intended to grapple with various issues including how technological advancements will affect employment.
During the state Senate’s two-hour debate Tuesday night, some Democratic senators took direct aim at the gig economy, indicating they may have no interest in any future compromise or exemption.
“Let’s be clear, there is nothing innovative about underpaying somebody for their labor, or basing an entire business model on misclassifying workers,” said Sen. Maria Elena-Durazo, who was formerly a prominent labor activist from Los Angeles.
Republican lawmakers attacked the bill as picking winners and losers. Some moderate Democrats voiced similar concerns, saying they were reluctantly supporting the bill with the expectation of continuing working on the issue next year, when the legislature reconvenes.
Biden Blocks Trump-Era Gig-Worker Rule
The move stopped regulation that would have made it easier for firms to categorize gig workers and others as independent contractors.
The Biden administration blocked a Trump-era regulation that would have made it easier for businesses to categorize gig workers and others as independent contractors, and signaled it would take a tougher enforcement stance against employers on worker classification.
The Labor Department said Wednesday it is nullifying a rule it completed in early January that sought to make it more difficult for a gig worker, such as an Uber or DoorDash driver, and other workers to be counted as an employee under federal law.
Having status as an employee, rather than a contractor, means those workers are covered by federal minimum-wage and overtime laws.
Jessica Looman, principal deputy administrator for the Labor Department’s Wage and Hour Division, said the Trump rule would have narrowed which workers were counted as employees across the economy, not only gig workers, allowing more employees to be classified as contractors.
“Misclassification of employees as independent contractors presents one of the most serious problems facing workers today,” she said.
The department recently took action against a restaurant classifying its dishwashers as contractors and found 70 home-health aides who were misclassified as contractors, Ms. Looman added. She said the department will look for opportunities to enforce existing laws, especially as they apply to lower-wage workers.
Ms. Looman said Wednesday’s announcement shouldn’t dramatically change how the department regulates app-based services but said the department is engaging with those companies and others about labor-law enforcement.
The Biden administration is “just going backwards with what they’ve done and not helping resolve the misclassification problem to the extent they think it is one,” said Maury Baskin, co-chairman of the law firm Littler Mendelson PC’s Workplace Policy Institute and an attorney who represents businesses.
“They’re just leaving the situation in the chaotic state it’s been.”
Mr. Baskin is serving as counsel to business groups, including the Associated Builders and Contractors, which in March filed a federal lawsuit against the Labor Department challenging the Biden administration’s plan to delay and withdraw the earlier Trump action.
Gig-economy companies were among the most vocal proponents of the Trump-era rule, seeking to cement drivers and similar workers as contractors after California’s legislature passed a law requiring the companies to reclassify their drivers as employees, eligible for broad employment benefits.
In November, voters in California exempted Uber Technologies Inc., Lyft Inc., DoorDash Inc. and others from the state law.
While the exemption allowed the companies to preserve their business models in the most populous U.S. state, they did concede some new benefits such as health insurance for drivers who worked 15 hours or more a week, occupational-accident insurance coverage and 30 cents for every mile driven.
At the time, the companies said they would lobby to make this model—flexibility for drivers with limited benefits—the national standard.
Uber spokesman Noah Edwardsen on Wednesday said the company views the current federal employment system as outdated. Workers must choose to be an employee with more benefits and less flexibility, or an independent contractor with more flexibility and limited protections, the spokesman said.
“Uber believes that we can combine the best of both worlds by offering independent work opportunities to the hundreds of thousands of workers that use the Uber platform while also providing these workers with meaningful benefits,” he said.
In January, Uber said the Trump rule recognized the flexibility gig workers sought. Trump administration officials said their rule made it easier for Americans to be self-employed and set their own hours.
Elizabeth Jarvis-Shean, vice president for communications and policy at DoorDash, said its drivers on average work fewer than four hours a week and value flexible schedules.
“We look forward to continuing to work with the Biden administration and lawmakers across the political spectrum to help develop a new portable, proportional and flexible benefits framework,” she said.
Lyft spokeswoman Julie Wood said the company sees the regulatory action as an “opportunity to refocus the conversation on what drivers need and want, which is independence plus benefits.”
The Labor Department acted this week to block the rule before it was implemented Friday, following a common practice of presidents of different parties undoing the prior president’s pending rules early in a new administration.
Nullifying the Trump rule maintains the decadeslong status quo, which has largely allowed app-based services to not count drivers and other providers as employees. The Labor Department at this time isn’t planning to offer new regulations for independent contractors, Ms. Looman said on a Tuesday call.
By blocking the Trump rule, the Labor Department will continue to use its previous regulation to enforce the Fair Labor Standards Act, which was enacted in 1938. While Wednesday’s action doesn’t immediately change how gig workers are classified, it leaves ambiguity about how a Depression-era law will be applied to a smartphone economy.
Labor Secretary Marty Walsh, in an April interview with The Wall Street Journal, said that legitimate independent contractors are an important part of our economy, but the Trump-era rule made it too easy to deny workers employee status. Employees are also better positioned than contractors to organize into labor unions. The Biden administration has made creating union jobs a priority.
“We’ve seen employers are increasingly misclassifying their workers as independent contractors in order to reduce labor costs and take a lot of protections away from workers, including minimum wage and overtime,” Mr. Walsh said.
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