The landmark legislation AB5 passed the Senate on Wednesday (Sept. 11) and is expected to be supported by the Assembly and signed into law by Gov. Gavin Newsom.
The bill challenges the definition of contractors in the gig economy and could lead to some workers being reclassified as employees, a move Uber is vowing to fight.
“Contrary to some of the rhetoric we’ve heard, AB5 does not automatically reclassify any rideshare drivers from independent contractors to employees,” Tony West, Uber’s chief legal officer, said in a call with reporters after the legislation passed, the WSJ reported. “AB5 does not provide drivers with benefits, nor does it give drivers the right to organize. In fact, the bill currently says nothing about rideshare drivers.”
Despite having minimal worker costs and being back by billions in investments, Uber and its competitor Lyft are each losing millions, the article said. Both companies want to be exempt from the proposed new law.
The bill puts the burden of proof on the employer and requires that companies classifying workers as contractors prove it based on new criteria.
Lawmakers expected pushback from Uber and added enforcement measures to the bill that would empower some district attorneys to crack down on non-compliance. Companies would likely pass the cost burden onto consumers, which could lead to a possible 30 percent price hike for rides, analysts are forecasting.
“Consumers could look at alternatives. They may go back to taking a taxi,” Brent Thill of investment bank Jefferies Group told the WSJ.
Uber, Lyft and DoorDash are planning to spend $90 million to bolster a ballot initiative that would make them exempt. Uber is going a step further and has pledged it will litigate misclassification claims from drivers.
An alliance of labor groups in New York is asking for similar legislation. Washington State and Oregon failed to pass a bill that was similar in nature AB 5.