Workers in the gig economy in California may be getting extra labor protections if Assembly Bill 5, which could upend the definition of contract employees, is taken up by the California Senate by the time it adjourns on September 13, as is expected. The bill cleared the fiscal committee in the state senate on August 30. Here, labor law expert Stanford Law Professor William B. Gould IV discusses the bill and objections to it by Lyft and Uber.

First, can you lay out the highlights of California Assembly Bill 5?

AB5 sets forth a new so-called “ABC test,” already adumbrated by the California Supreme Court last year in the landmark Dynamex decision, simplifying the resolution of disputes about whether a worker is an independent contractor or employee. Notwithstanding Dynamex, legislation seemed desirable because the ruling only covered wage and hourly work and the legislature was best suited to address the need for tailoring or exemptions. The ABC test replaces relatively convoluted criteria, which invited litigation by requiring an employer to establish:

• that the worker is free from direction and control in connection with the performance of work;
• that the worker performs work outside the “usual course” of the hiring entity’s business and;
• that the worker is customarily engaged in an “independently established trade, occupation, or business of the same nature as that inviting the work performed” in order to classify them as independent contractors.

The bill, like the Court’s ruling, is aimed at the misclassification of workers who are employees and entitled to labor protection and the consequent deprivation of tax revenue which should go to the public treasury. The misclassification issue is not new, emerging most prominently in trucking and taxis in the ‘70s where independent contractors rose sharply, then moved into product packaging at the turn of this century and more recently morphing into the use of such contractors in the so called “gig” economy of the past decade as increasing inequality has required workers to take more than one job, frequently on a part-time or temporary basis.

What prompted this proposal? What are the key challenges for gig economy workers?

The problem of growing inequality, fueled partially by the decline of unions, is one of the most critical issues confronting the United States and the rest of the West. The narrowing of employee status, those entitled to labor laws, which are a prerequisite to civilized society, is a critical element in this picture. The dignity of work allows one to put bread on the table and enhance the future of children, educationally and otherwise.

The growing gig economy and well-chronicled defiance and evasion of government regulations brought attention to ride sharing companies such as Uber and Lyft and their “business model,” which was predicated on the widespread use of drivers as independent contractors, deprived of minimum wage, reimbursement for expenses, overtime protection, workers compensation, health insurance, social security, unemployment compensation, and the protections of anti-discrimination law. These workers have also been denied the right to organize and engage in collective bargaining by the Trump administration’s National Labor Relations Board (NLRB). Like the Supreme Court’s decision, AB5’s authors have attempted to remedy inequality and exploitation by facilitating the proper status of employees to drivers. The attempt to foster protection where driver rates are unilaterally imposed and disputes about discharge or discipline could not be challenged was an objective.

Will AB5 address those labor concerns?

AB 5 should redress these inequities in the workplace. At the same time it says nothing about the right to organize and engage in collective bargaining, an item now open to state regulation, given the  NLRB’s exclusion of gig drivers from federal coverage.

There’s been pushback from gig economy companies and other companies that rely heavily on contract workers. Can you explain the alternative proposal that has been put forward by Uber and Lyft?

When it became likely that Uber and Lyft could not obtain an exclusion from the bill’s coverage (doctors, insurance agents, real estate agents, hair stylists, barbers, dentists, architects, engineers have all done so on grounds of worker self-sufficiency or genuine independence or the like), they put forward their own proposal that includes: (a) $21 minimum wage, but no reimbursement for expenses; (b) portable industry-wide fringe benefits of undefined size and scope; (c) a voice for workers on a “sectoral basis.” There are no suggestions thus far that would address how worker representaion would be established, a considerable concern given Uber’s reliance upon employer-controlled bargaining in New York City and its proposal to follow this precedent in San Francisco. Uber and its allies have often spoken of the need for a so-called third classification in between employee and contractor. Simultaneously, they have threatened a $90 billion referendum campaign in 2020 to reverse AB5 if their demands are not met.

There’s some concern that this bill, if passed, will hurt the gig economy companies and also California’s thriving music business. Do you share that concern? If so, can you suggest a remedy?

Uber and Lyft have often spoken about the loss of flexibility in number of hours worked or timing of work in the event that drivers become employees. Though this doesn’t follow as a matter of law that there will be fixed schedules, it is likely that schedules will be set and the number of drivers reduced. It may be that a demarcation line between regular and casual workers could be established as in trucking and longshore.

Several sectors complained with persuasiveness that the bill as written should exclude their industries. For example the music industry and the ability of young musicians to make music independently and newspaper carriers who work with a number of newspapers, the concern being the possibility that rural deliveries and indeed all print versions of papers will be discontinued for cost reasons. One way of evading unforeseen consequences would be to limit AB5’s scope as a first step to the industries containing most of the known abuses—industries like trucking, taxis, and ride sharing. Seattle enacted a collective bargaining ordinance just 4 years ago focused exclusively upon ride sharing—it was invalidated by the Court of Appeals for the Ninth Circuit. These concerns will be discussed during the coming week. A thorough and detailed discussion of other businesses which may be affected is contained in an article by Carolyn Said in the SF Chronicle from September 5, 2019.

William B. Gould IV is the Charles A. Beardsley Professor of Law, Emeritus at Stanford Law School. He served as Chairman of the National Labor Relations Board in the Clinton administration and as Chairman of the California Agricultural Labor Relations Board from 2014-2017. The sixth edition of his book A Primer on American Labor Law was published this year.