Risk & Compliance

Gig Worker Protection Bill Passes California Senate

The bill would require gig economy workers to be reclassified as employees instead of independent contractors.
Lauren MuskettSeptember 11, 2019

The State Senate of California passed a bill that would require gig-economy workers to be reclassified as employees, making it harder for gig-economy companies to treat them as independent contractors.

If passed, the legislation could have a transformative effect on companies such as Uber, Lyft, DoorDash, Postmates, Instacart, and other online labor platforms that have said the independent-contractor arrangement is central to their business model.

The law could affect the employment status of more than one million workers in California. If passed, it would go into effect on Jan. 1, 2020. The bill, AB-5, passed in the state senate in 29-11 but must still pass the state assembly where a vote is expected this week.

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California Governor Gavin Newsom is expected to sign it, but did tell the Wall Street Journal that he was still in negotiations with affected companies. Shares of Lyft and Uber jumped after the governor’s statement.

Gig economy companies are expected to wage a massive effort to stop the bill from passing.

Uber, Lyft, and Doordash have said they would spend $90 million to hold a ballot initiative to exempt their companies from the legislation. Uber and Lyft have proposed a minimum wage of $21 per hour for drivers in California as part of their pushback efforts.

“Today, our state’s political leadership missed an opportunity to support the overwhelming majority of rideshare drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits,” a spokesperson for Lyft said in a statement.

Uber said the legislation would lead to its hiring fewer drivers. A spokesperson for Doordash said that the company was disappointed but committed to establishing protections for gig workers.

Uber and Lyft both have their corporate headquarters in California.

Top Democratic Presidential candidates including Elizabeth Warren, Bernie Sanders, and Kamala Harris have also expressed support for the bill.