California lawmakers passed a bill Tuesday that would make it harder for ride-hailing and food delivery companies to classify their workers as independent contractors, a stipulation that has been at the heart of the gig economy. The 29 to 11 vote in the state Senate advances the bill—formally known as AB5 or Assembly Bill 5—that could affect more than 1 million workers in the state, reclassifying many of them as employees rather than contractors. The change in status would mean drivers would be entitled to a raft of employee rights and benefits, including wage minimums, health benefits, and paid leave. The bill has been heavily opposed by ride-sharing behemoths as it could lead the way for other state regulation, threatening to upend the tech companies’ business model.
The impact of the bill extends beyond app-based contractors, as the New York Times notes, many low-wage workers have been pushed from the employment roll into contractor status, including janitors, nail salon workers, and construction workers. “California’s governor, Gavin Newsom, endorsed the bill this month and is expected to sign it after it goes through the State Assembly, in what is expected to be a formality,” the Times reports. “Under the measure, which would go into effect Jan. 1, 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.”
The bill, which passed the state Assembly earlier this year, comes in response to a California Supreme Court ruling in 2018 that updated how the state defined an employee versus a contractor. From the New York Times on the April 2018 court ruling:
The court essentially scrapped the existing test for determining employee status, which was used to assess the degree of control over the worker. That test hinged on roughly 10 factors, like the amount of supervision and whether the worker could be fired without cause. In its place, the court erected a much simpler “ABC” test that is applied in Massachusetts and New Jersey. Under that test, the worker is considered an employee if he or she performs a job that is part of the “usual course” of the company’s business. By way of an example, the court said a plumber hired by a store to fix a bathroom leak would not reasonably be considered an employee of that store. But seamstresses sewing at home using materials provided by a clothing manufacturer would probably be considered employees.
Despite Democrat Gov. Gavin Newsom’s support of the bill, the question over how to regulate tech companies and the people who use them to make a living has caused a split in the Democratic Party. Tech companies have gobbled up former Clinton and Obama administration officials to help lobby government, a move that highlights the undercurrent of the party that has gotten more worker-centric in its current incarnation. “The struggle has illuminated a deepening divide within the Democratic Party over establishment pro-corporate sensibilities, which progressives say has come at the expense of workers who have suffered under the gig economy,” the Washington Post notes. “As recently as this week, the candidate who most represents what political observers see as the establishment wing of the party—Former vice president Joe Biden—had declined to take a stance on AB5… Presidential candidates including Warren (D-MA), Sen. Bernie Sanders (I-VT), Sen. Kamala D. Harris (D-CA) and South Bend, Ind. Mayor Pete Buttigieg have all expressed their support for the California bill.”