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Uber drivers in California are about to become Uber employees.
On Friday, senators from the member states of the credit committee voted for AB 5, a controversial bill that would require companies to classify workers as employees, not as independent contractors (with a few exceptions). And despite an aggressive lobbying campaign, Uber and Lyft have not been exempted.
Legislators voted 5 to 2 to refer the bill to the Senate for a final vote.
If AB 5 succeeds in the entire Senate, it would essentially disrupt an economic model that Silicon Valley championed and valued. Uber, Lyft and other application-based concert companies rely on hundreds of thousands of independent contractors to organize rides, deliver food and perform other tasks.
Reclassifying them as employees would change everything.
Network workers would benefit from the labor protections and benefits that all employees enjoy, such as unemployment insurance, health care subsidies, paid parental leave, overtime, workers' compensation, paid breaks and a guaranteed minimum hourly wage of $ 12.
The extra cost is why the concert companies are so furious.
On Thursday, Uber, Lyft and DoorDash announced that they would each spend $ 30 million on the voting initiative to cancel AB 5 if the vote was successful.
"We are convinced that California voters are in favor of a solution combining worker flexibility and economic security," wrote Max Rettig, DoorDash's Public Policy Officer, in a statement shared with Vox.
The California unions, which support AB 5, immediately responded.
"We are going to face the absurd political spending of concert companies with a vigorous campaign by workers to defeat this measure in order to guarantee workers basic protection and the right to form a union in accordance with the law," Art Pulaski, Treasury Secretary of the California Federation of Labor, wrote in a statement to Vox.
The fight between the unions and Uber – one of Silicon Valley's most valuable investments – is perhaps the most important legislative battle taking place in the country. And the vote in committee on Friday suggests that Uber is losing.
Stakes are high for workers and businesses – and candidates are taking sides
AB 5, which was voted in the National Assembly in May, represents the biggest challenge to date for the business models of companies that organize rides, and would rewrite the rules of the entire entertainment economy. Hundreds of thousands of independent contractors in California, ranging from Uber and Amazon drivers to exotic manicurists and dancers, would likely become legal employees.
This radical, union-backed bill would make it much harder for companies to classify their employees as independent contractors, a common practice that allows companies to circumvent federal and state labor laws.
The struggle has degenerated so much that even the presidential candidates have weighed it.
First, Senator Elizabeth Warren, who said in an editorial earlier this month: "All Democrats must stand up and say, without coverage, that we support AB 5 and that we support the status of employees for the entertainment industry. "Sen. Bernie Sanders, who introduced a similar bill at the federal level, then unequivocally endorsed it. Senator Kamala Harris' campaign stated that she also supported AB 5. This week, Mayor Pete Buttigieg, Mayor of South Bend, Indiana, announced his support for the bill as he met with Uber drivers in front of the company headquarters in San Francisco.
Their approval is another sign that not only is the Democratic Party becoming much more progressive, but that this state struggle could have national implications. Presidential candidates want to be on the safe side. In the past, traditional democrats were careful not to annoy big donors and technology companies like Uber, and would probably have sought a compromise.
But Warren, Harris and Sanders are lobbying California lawmakers to make no exception for application-based concert companies like Uber. This alone reflects the growing power of the American labor movement.
California invoice AB 5 explained
The California bill, known as the AB 5, extends the groundbreaking decision made last year by the California Supreme Court Dynamex. The ruling and the bill encourage businesses to use the "ABC test" to determine if a worker is an employee. To hire an independent contractor, companies must prove that the worker a) is free from all control, b) performs work that is not at the core of his activity and c) is self-employed in this sector. If they do not meet these three conditions, then they must be classified as employees.
This is a much clearer – and stricter – standard of proof than the vague guidelines set out in the federal law. And this is one of the biggest challenges to date for the profit model of Uber, Instacart, Postmates and other technology companies that depend on a small army of independent contractors. Uber is likely to reclassify tens of thousands of California drivers as employees, which Uber drivers have been arguing in court without success for years.
California companies have been frightened by the possibility of the bill being passed. The state chamber of commerce and dozens of industry groups lobbied for exemptions, and a long list of professions was excluded from the project: doctors, dentists, lawyers, architects, agents insurance, accountants, engineers, financial advisers, real estate agents, and hairdressers who rent stands in salons.
Uber and Lyft, in particular, lobbied for an exemption from the bill in the Senate. They even asked in public for a compromise. Companies want to continue to treat drivers as subcontractors. In return, they promise to set a minimum wage rate for drivers while taking charge and depositing passengers, to create a fund guaranteed by the company for benefits such as paid leave and to establish an association. drivers to advocate for further improvements.
Drivers who organize to support AB 5 have hit back with their own messaging. They say that nothing in the law would prevent companies from offering employees a flexible schedule.
This did not stop Uber and Lyft from stepping up their campaign to get an exemption. In recent weeks, Uber and Lyft have sent emails to drivers and passengers in California, urging them to contact their lawmakers to urge them to compromise.
"Help protect carpools in California," read a message sent to Lyft customers this week.
So far, there is no agreement on the horizon.
Mobile phone applications have made every effort to keep drivers as contractors
When Uber drivers went on strike around the world in May, their frustration was largely due to their lack of power as independent contractors.
Uber's profit model, like other companies in the entertainment industry, depends on money saved through US labor laws.
By classifying drivers as independent contractors and not employees, Uber does not have to pay certain taxes, benefits, overtime or minimum wages to tens of thousands of drivers. As independent contractors, drivers do not have the right to form unions or negotiate contracts.
Uber drivers have spent more than six years fighting the company, claiming they were intentionally misclassified. They argue that drivers should be considered employees because the company has a lot of control over their workday, including strict rules regarding the condition of their vehicles, the journeys that they can perform and routes to use.
Uber refused to reclassify the drivers, claiming that they are not employees because they set their own schedules and provide their own cars.
Until now, the problem has not been solved, at least not at the national level.
In May, Uber settled the case with 13,600 Uber drivers, agreeing to pay them $ 20 million, but without changing their status as an independent contractor. The other 350,000 drivers who were part of the original class action had signed a binding arbitration agreement. A federal judge therefore requires them to pursue their case in a private court, where they are less likely to win.
But it would be difficult for Uber to pass the ABC test if the California bill became law; Driving people by car is a central part of the business. Any questioning of the status of driver as an entrepreneur threatens the profitability of Uber, which is another reason why the bill is so important.
Uber has been frank with investors about the risk of a workers' revolt. In a recent report filed by the Securities and Exchange Commission, Uber acknowledged that giving drivers the same rights as employees would "fundamentally change" the company's financial model:
If, as a result of laws or court rulings, we are required to classify drivers as employees … we would incur significant additional costs for driver compensation, possibly including costs related to enforcing laws on wages and hours and meal and rest periods), employee benefits, social security contributions, taxes and penalties.
It is not surprising then that Uber is not satisfied with a law that would require the company to hire drivers as employees.
As employees, stage workers would have a safety net for the very first time. The changes to the bill would also benefit the state of California, which estimates losing $ 7 billion a year in tax revenue to companies that misclassify their employees. California has the largest state-owned economy in the country and is home to the Silicon Valley technology industry, which means its legislators have a disproportionate influence on national politics. The bill could lead other states to take similar measures.
"We are in a great economy and yet most workers have not saved money," said Caitlin Vega, Legislative Director of the California Federation of Labor at the time. "[Companies] do it because they can; they ran away with it. "
Democrats have an anti-veto supermajority in the California Senate and Assembly. It is therefore very likely that AB 5 will become law, which will complicate the task of these companies that misclassify their workforce. The full Senate is expected to vote on the bill in September.
It is still unclear whether Governor Gavin Newsom will sign AB 5 without excluding the concert companies. Even if he did not, legislators could override his right of veto if they could get enough votes.
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