SACRAMENTO – California has passed landmark employment legislation challenging the business model of gig-economy companies such as ride-hailing giants Uber Technologies and Lyft, some of the powerhouses of Silicon Valley over the past decade.
Assembly Bill 5, sponsored by Assemblywoman Lorena Gonzalez-Fletcher (D-San Diego) recently passed in the Democrat-led state Assembly before passing the state Senate in a 29-11 vote along party lines, with the chamber’s Republican caucus casting the only no votes.
Gov. Gavin Newsom, a Democrat, signed the bill into law last week.
Assemblywoman Lorena Gonzalez (D-San Diego) | Assemblywoman Lorena Gonzalez's website
The bill forces companies to reclassify certain contract workers as employees.
"Classifying drivers as employees could cause Lyft to act like every other company with employees,” Lyft spokesman CJ Macklin said. “In our case, that could mean limiting drivers' hours and requiring shifts. Additionally, drivers may see their wages become uniform, earning a flat rate instead of the higher earning opportunities they currently enjoy. It’s also worth noting that Lyft would only need a fraction of the drivers it has now if it moved to an employment model, with a recent report indicating as many as 300,000 Californians could lose the opportunity to drive with Lyft entirely.”
Macklin also said that riders could see higher costs and longer wait times, or lose service entirely.
"But ultimately, this isn't about should we protect the status quo, but what is the right future for providing protections and benefits to drivers," Macklin said. "That’s why we've been working with elected officials and labor leaders on an alternative to AB5 that provides drivers with strong protections that include an earnings guarantee, a system of worker-directed portable benefits, and first-of-its kind industry-wide sectoral bargaining, without jeopardizing the flexibility drivers tell us they value so much. ... We are confident we can still reach a deal, but are prepared to go directly to California voters with a ballot initiative, if needed, and have already committed $30 million towards a ballot campaign."
Additionally, Lyft released a press release on a Beacon Economics report on how the California Supreme Court's decision in Dynamex will impact ride-hailing businesses. The report includes the number of drivers who could be out of work in each Senate and Assembly district. In Gonzalez-Fletcher's district, Lyft's report states 6,461 drivers could be out of work.
Ride-hailing companies had proposed alternative solutions with additional workplace protections and a minimum earnings floor that would benefit drivers without taking away their independence but legislators did not budge as the bill swiftly passed.