Just a few feet from the podium, a Lyft driver began talking to a few TV news reporters about why he opposes the bill. A couple of other drivers in favor the bill joined him and an impromptu debate followed.
“AB 5, it’s a gray area,” said the news conference crasher, who preferred to divulge only his first name, Francisco. “We don’t know where it’s going to go.”
“But we have to take a chance,” countered Terri Beilke, a Lyft driver and a member of the Rideshare Drivers United union in San Diego, “because it’s unlivable the way it is now.”
The exchange underscored the tensions underlying AB 5 that will tighten the rules for companies when they label workers as independent contractors. The bill will affect hundreds of thousands of workers California — not just Uber and Lyft drivers but others in the so-called “gig” economy who have taken on “side hustles” to make extra money but, potentially, to freelancers ranging from janitors to journalists and manicurists.
If passed by the Legislature and signed into law by Gov. Gavin Newsom, AB 5 would extend labor protections and benefits such as unemployment insurance, health care subsidies and a guaranteed $12 an hour minimum wage to workers who qualify.
“We have to ensure that workers who are doing the work today are paid and treated fairly under California labor law,” Gonzalez said. “Labor laws should be technology neutral.”
The two big dogs in the hyper-competitive ridesharing space, Lyft and Uber, rarely work together but when it comes to AB 5, they have joined forces, saying the legislation would fundamentally change their business models.
Lyft and Uber, along with officials from companies including DoorDash and Postmates, have been talking to labor groups about a possible legislative alternative to AB 5 that would offer increased benefits to their workers while still considering them independent contractors. Discussions have dragged on throughout the summer.
Just a few hours after the Gonzalez news conference, executives from Uber and Lyft upped the stakes by threatening to spend at least $60 million on a ballot measure if a compromise can’t be hammered out.
“We remain focused on reaching a deal and are confident about bringing this issue to the voters if necessary,” Adrian Durbin, senior director of communications at Lyft, said in a statement.
AB 5 works to codify into law a groundbreaking ruling made last year by the California Supreme Court, known as the Dynamex decision. The high court created a three-pronged test, dubbed the ABC test, for businesses when it comes to classifying workers as independent contractors.
The most contentious requirement mandates that companies can only consider workers to be independent contractors if they perform services that are not central to the company’s business. Otherwise, they are considered employees.
Gonzalez said without AB 5, workers would have to file lawsuits to determine how the Supreme Court’s ruling would apply to them.
“That’s not fair to workers and that’s not fair to companies who are confused about the law,” Gonzalez said. “And so that’s why we need to codify it into state law.”
Among the benefits and guarantees companies would have to extend to workers deemed to be employees instead of independent contractors under AB 5 include overtime pay, Social Security and Medicare, workers’ compensation and disability insurance.
In June, equity research analysts at Barclays estimated that reclassifying workers could cost Lyft and Uber an extra $3,625 per driver in California and amount to losses of $500 million per year for Uber and $290 milion for Lyft.
Los Angeles-based Beacon Economics released a study Thursday estimating that increased costs and the introduction of formal work schedules could lead to as many as 300,673 fewer drivers for Lyft “under certain, plausible scenarios.”
“That is an argument we’ve heard for generations from employers,” Gonzalez said. “They (Uber and Lyft) went public and a lot of people became billionaires and hundred-millionaires and then they turn around and say they can’t pay their drivers a minimum wage.”
The legislation has also received pushback from the newspaper industry.
Newpaper executives say freelance writers, photographers, cartoonists, copy editors and even workers who deliver newspapers, are necessary to a newspaper’s business and should be exempt from the ABC test.
“Freelance journalists produce the very content and are at the heart of what a newspaper does,” said Jim Ewert, general counsel of the California News Publishers Association. “Moreover, newspaper carriers distribute that final product to subscribers and readers.”
Gonzalez has made an amendment to AB 5 that says once freelance journalists and others who “provide content” surpass 25 assignments per year at a given outlet, their classification would go from independent contractor to employee. Ewert said the amendment does not go far enough.
Gonzalez said an update to the amendment is expected Friday.
“We’re trying to create opportunity for journalists and we don’t want to take away that opportunity,” she said. “But at the same time, we know that freelancers can be used to bust a union. Freelancers can be used as an excuse to not actually employ folks.”
The Union-Tribune is a member of the California News Publishers Association and Union-Tribune Editor and Publisher Jeff Light has taken part in discussions about the group’s concerns with AB 5 with Gonzalez and Senate pro tem Toni Atkins, D-San Diego.
AB 5 has passed the Assembly. It is now in the Senate Appropriations Committee, where chairman Anthony Portantino will decide Friday if it goes to the Senate floor or gets held back.
The final day of the legislative session is Sept. 13.
The state estimates about $7 billion in payroll tax revenue is lost each year because workers are misclassified, which also leads to workers relying more on the public safety net when they are denied work-based protections.
©2019 The San Diego Union-Tribune. Distributed by Tribune Content Agency, LLC.
