California moving to gut Uber/Lyft

California is currently debating the final stages of a new bill (AB 5) that would fundamentally redefine the business relationship between businesses and private contractors. It’s framed as a way to ensure benefits are provided to all private contractors, but it was obviously crafted to go after the gig industry with a specific focus on Uber, Lyft and other ride-sharing apps. If they manage to pass this into law without offering exemptions for these drivers, the companies negotiating such services would have to treat the drivers as employees, paying benefits, a minimum wage and various other perks. This would effectively shut Uber and Lyft down. (Yes, the link goes to Vox. I know. But they’ve got a decent, balanced summary of the story thus far.)

In the past two weeks, they’ve published an op-ed in the San Fransisco Chronicle and are now enlisting drivers and lobbyists to help weaken AB 5, a bill that would make it harder for companies to label workers as independent contractors instead of employees — a common practice that has allowed businesses to skirt state and federal labor laws. The bill passed the state Assembly last month with overwhelming support and is now headed to the California Senate for a vote at the end of the summer.

AB 5 is one of the biggest challenges yet to the ride-hailing companies’ business models and would rewrite the rules of the entire gig economy. Hundreds of thousands of independent contractors in California, ranging from Uber and Amazon drivers to manicurists and exotic dancers, would likely become employees under the bill.

The impact on both the companies and the drivers is obvious. Uber couldn’t possibly offer rides for the prices they do if they had to provide full employee benefits to everyone who signs up to drive. And many drivers (at least the ones I encounter) are either retired people or younger ones who drive as a side job for extra money. If they’re already getting benefits somewhere else, all they’re really looking for out of driving is some extra cash. Why remove that option from them?

Interestingly, this law is sweeping enough in its wording that it’s going to hit others outside of the new gig economy. Note that the linked article refers to other types of employment ranging from manicurists and stylists to exotic dancers. Most strip clubs these days hire dancers who work as independent contractors, keeping their own tips and sometimes even having to pay for a spot on the stage. (Or so I’ve heard. Ahem.)

What happens to them if they are turned into employees? How many dancers could a club afford to pay full-time with all the mandatory benefits? And what of the dancers’ tips? If they rake in a big haul on a busy night, does that money all just go to the club because their “employees” are already being compensated for their time on stage? There’s a similar situation for people like manicurists who rent out a chair in a salon to do their business but keep their own profits from customers. Are they to be booted from the salons?

In California’s rush to try to drive Uber and Lyft out of business and benefit the taxi industry (with their unions and lobbyists) they may be knocking down a lot more workers than they intended. Or did they intend to do that all along?

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David Strom 5:21 PM on December 09, 2022