California law on rideshare drivers may hurt 'gig economy'
California law on rideshare drivers may hurt 'gig economy'
A landmark bill was approved
29-11 late Tuesday in the state senate, with the assembly -- which has already
approved the measure -- expected to send it to California Governor Gavin
Newsom.
The legislation, which is being
closely watched in other states, responds to critics who argue that companies
like Uber and Lyft shortchange drivers by denying them employee benefits.
The law, if enacted, challenges
the business model of the rideshare platforms and others which depend on
workers taking on "gigs" as independent contractors.
"This is a huge win for
workers across the nation!" tweeted the California Labor Federation, which
endorsed the bill known as AB 5.
"It's time to rebuild the
middle class and ensure ALL workers have the basic protections they deserve."
Newsom said however he was in
talks with Lyft and Uber on a possible compromise, according to the Wall Street
Journal.
The governor planned to
"stay at the bargaining table, to continue to negotiate," the report
said.
Uber has no plans to immediately
reclassify drivers as employees in January, when the law takes effect.
The law "does not provide
drivers benefits; give them the right to organize, or classify them as
employees," Uber chief legal officer Tony West said on a call with
reporters.
Uber will press for a new
classification that considers workers independent while guaranteeing benefits,
and has allocated millions of dollars to get a referendum on the ballot to
support an option that would let drivers remain independent while providing
safety nets.
"It was a leadership moment
that was lost by California, to be able to lead that third way that fits th
21st century economy and the way the world works today," West said.
West added that drivers would
lose by being forced to work shifts, and not being able to "dual-app"
by working for more than one rideshare service.
"Based on what drivers tell
us, they are not changes that they would welcome," he said.
- Business model challenged -
Lyft spokesman Adrian Durbin said
in a statement after the vote that the state's political leadership
"missed an important opportunity to support the overwhelming majority of
rideshare drivers who want a thoughtful solution that balances flexibility with
an earnings standard and benefits."
Durbin added: "We are fully
prepared to take this issue to the voters of California to preserve the freedom
and access drivers and riders want and need."
Lorena Gonzalez, the Democrat who
authored the bill, said the legislation helps protect the drivers and stops
platforms offloading social costs.
"We cannot sit by while
companies pass off their own costs of doing business onto California's
taxpayers and responsible businesses, while depriving millions of workers of
the labor law protections that they are rightfully entitled to," Gonzalez
said in a recent statement.
- Creating a safety net -
Lyft and Uber have argued that a
large number of their drivers want to be able to work on their own schedule
without the restrictions of full-time employment.
Arun Sundararajan, a New York
University professor and author of "The Sharing Economy," said the
California lawmakers failed to consider ways to offer social benefits while
supporting a more flexible labor model.
The bill "will hurt all of
the platforms through an increased cost structure," Sundararajan told AFP.
"But it will hurt the
smaller platforms more because they will be less able to spread demand across
the workforce."
He expressed disappointment that
the legislators failed to address a way to offer health care and retirement
benefits that are not linked to full-time employment.
"There's no reason why
someone has to be boxed into the full-time employment category in order to get
benefits," he said.
Still, he said the emergence of
digital platforms and sharing economy models means this segment is likely to
continue to grow despite the legislative moves.
"I wouldn't say this is a
turning point, it just means there is still a lot of work to be done to fashion
a social safety net," he said.
Daniel Ives, a Wedbush Securities
analyst who follows the tech sector, said the matter is far from resolved.
"We fully expect gig economy
companies to continue to push back and find a middle ground, but it's unclear
if and how much they will start paying in the interim period," Ives said
in a research note.
"We think a middle-ground approach is actually the best outcome for
all constituents; the companies, drivers and riders.
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