California Senate approves invoice that requires gig economic system employees to be reclassified as staff
What just happened? The California Senate has passed legislation that would reclassify many gig economy workers as employees, entitling them to additional rights and benefits that aren’t afforded under their current contractor status. It could be a major shake-up for the gig economy.
The bill, dubbed Assembly Bill 5 or AB5 for short, was approved by a 29-11 vote along party lines and is destined for the state Assembly where it is expected to be given the green light. From there, it’ll find its way to the desk of Governor Gavin Newsom who openly supported the measure in a Labor Day op-ed. If passed, it’ll go into law on January 1, 2020.
Proponents of the bill claim that companies like Uber, Lyft, Postmates and Instacart classify workers as independent contractors in order to avoid paying minimum wage, overtime, workers’ compensation and unemployment insurance.
State Senator Maria Elena Durazo, D-Los Angeles, said there’s nothing innovative about underpaying someone for their labor and basing an entire business model on misclassifying workers.
Those opposed to the reclassification – both companies and workers – say they value the flexibility afforded by independent contractors. Some are also concerned that the added cost of doing business under the new classification – which could add 30 percent to labor costs – may result in poorer service and higher prices for customers.
Several professions including dentists, insurance agents, lawyers, hairstylists and commercial fishermen were able to talk their way out of AB5 because they typically set their own prices and negotiate directly with customers (remember, most things are negotiable if you just ask). Lyft, Uber and other gig companies tried but failed to negotiate an exemption, the San Francisco Chronicle said.