The law will make many ridesharing and courier companies offer fundamental labor rights like minimum wage, overtime, and paid leave.
United States California Governor Gavin Newsom signed into law a labor bill, which would require companies from the “gig economy” sector to reclassify their workers as employees.
“California is now setting the global standard for worker protections for other states and countries to follow,” the state assemblywoman who authored the bill, Lorena Gonzalez, said in a statement.
The new law, under the name of Assembly Bill 5, has been opposed by companies that depend heavily on ‘independent’ workers, including ride-hailing and delivery services such as Uber or Lyft.
Through the contested legislation, which will go into effect on January 2020, these companies will only be allowed to considered private contractors those that 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. In theory, this will make many ridesharing and courier companies offer fundamental labor rights like minimum wage, overtime, and paid leave.
The progressive governor called it a "landmark legislation," adding that the "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."
In the meantime, Uber has warned it will aggressively contest that its drivers are not employees. While a Lyft spokesperson said that if necessary the company is prepared “to take this issue to the voters,” with Uber and DoorDash Inc. the companies have each committed US$30 million to put a referendum on the 2020 ballot.
A Gridwise study — an app used by ride-share drivers to be more efficient — found that the average hourly driver pay is currently at US$18.65, which means drivers are bringing home an average US$9 per hour after working for 12 to 16 hours a day, according to Washington-based think tank, Economic Policy Institute.
Drivers demand a guaranteed US$28 per hour minimum rate so that after expenses like gas, insurance payments, maintenance, they can bring at least US$17 per hour as implemented in New York City. Uber has stated that it can't pay its drivers more money yet paid its top five executives US$143 million in total compensation last year alone.