As expected, Governor Gavin Newsom signed AB 5 into law today, meaning that, at least in theory, companies like Uber, Lyft, and DoorDash will not be able to relegate the majority of their workforces — the drivers — to contractor status.
As we reported here last week, the bill passed through both of California's legislative chambers, after the companies spent part of the last year trying to scare their drivers into opposing it. (In one tactic, Lyft reportedly told drivers that they may soon be required to work for only one company and not double-dip with Uber, etc., though the law does not say that anywhere.)
The bill came out of a 2018 court case in the California Supreme Court, known as the Dynamex decision, which established a stricter test for determining whether a worker can be classified as a contractor. The test essentially asks a) whether the worker is free from the direction or control of the company in question in performing their work, b) whether the worker is performing duties that are outside the scope of the company's day-to-day functions, and c) whether the worker is customarily employed in the trade in question outside of their relationship with said company. In the case of ridehail-app drivers, all three tests likely fail — unless of course they've previously worked as a licensed taxi driver.
As Bay City News reports, the new law will take effect in 2020, and Newsom called it "landmark legislation for workers and our economy."
Under the law, workers at many gig-economy businesses will now need to be classified as employees if they work a certain number of hours, just like regular businesses in the state, and they will now be eligible for overtime pay and benefits.
How this will impact the business models of companies like Uber, Lyft and DoorDash remains unclear. As SF Weekly notes, the three companies have already funneled $90 million into a campaign committee to get a ballot measure going for 2020 that will undo AB 5. But how politically wise would it be to start advertising against the interests and livelihoods of hundreds of thousands of wage-earners?
One thing is for sure: Uber and Lyft rides, and food delivery fees, are most likely going to be getting more expensive.