California Governor Gavin Newsom signs gig worker bill AB-5 into law
California Governor Gavin Newsom has signed into law gig worker protections bill AB-5. This comes shortly after AB-5 passed in the California State Assembly and Senate.
"Today, we are disrupting the status quo and taking a bold step forward to rebuild our middle class and reshape the future of workers as we know it," bill author and Assemblyperson Lorena Gonzalez said in a statement. "As one of the strongest economies in the world, California is now setting the global standard for worker protections for other states and countries to follow."
AB-5 will help to ensure gig economy workers are entitled to minimum wage, workers' compensation and other benefits by requiring employers to apply the ABC test. The bill, first introduced in December 2018, aims to codify the ruling established in Dynamex Operations West, Inc. v Superior Court of Los Angeles. In that case, the court applied the ABC test and decided Dynamex wrongfully classified its workers as independent contractors.
According to the ABC test, in order for a hiring entity to legally classify a worker as an independent contractor, it must prove the worker is free from the control and direction of the hiring entity, performs work outside the scope of the entity's business and is regularly engaged in work of some independently established trade or other similar business.
"We agree with Gov. Newsom that California still has an opportunity to support the overwhelming majority of rideshare drivers who want a thoughtful solution that balances flexibility with earnings guarantees and protections," Lyft spokesperson Adrian Durbin said in a statement to TechCrunch. "We are confident that with his leadership we can reach a historic agreement, but if necessary we are prepared to take this issue to the voters to preserve the freedom and access drivers and passengers want."
Last week, Uber made it clear it plans to do whatever it takes to keep its drivers independent contractors.
"We will continue to advocate for a compromise agreement," Uber Chief Legal Officer Tony West said on a press call last week.
As Uber outlined last month, the company is pushing for a framework that would establish a guaranteed earnings minimum while on a trip, offer portable benefits and enable drivers to "have a collective voice."
He went on to say that Uber is continuing to explore several legal and political options to lay the groundwork for a statewide ballot initiative in 2020. Uber and Lyft announced a $60 million joint initiative last month, and now West is saying Uber is open to investing even more money in that committee account.
"This is not our first choice," West said. "At the same time, we need to make sure we are exploring all options and all alternatives to put forward a framework that works for the 21st-century economy, and we believe we have a framework that does that."
Despite opposition from Uber and other gig economy companies, the law will go into effect January 1, 2020.