By: Aaron Smallets
In 2009, the company originally known as UberCab changed the game.[1] Not only did it allow stranded passengers to catch rides at rates lower than cabs,[2] it carved out a whole new way to earn money. With the 2008 recession in full swing, the revolutionary business model could not have arrived at a better time.[3]
Now, those trying to survive in a bleak job market had an opportunity to make extra cash, whenever they wanted.[4] It wasn’t long before Uber, once sitting alone in the App Store, had company, as other ridesharing apps like Lyft[5] and Juno[6] also emerged.
The flexibility offered by such apps could be a thing of the past as a new bill out of California, the world’s 5th largest economy, redefines the term “independent contractor.”[7] The bill, titled AB5, recently signed into law by Governor Gavin Newsom,[8] codifies the California Supreme Court’s ruling last year in Dynamex Operations West, Inc. v. Superior Court of Los Angeles.[9] Under the slightly reformed test, for a company to prove that a worker is an independent contractor they have the burden of showing: (1) “the worker is free from their control,” (2) “performs work outside the company’s usual business,” and (3) “independent of their work for the company — is regularly engaged in the trade they’re hired to do.”[10]
This classification comes on the heels of a nationwide movement to improve working conditions, and create livable wages.[11] Defining workers as employees give them the right to benefits that many gig workers don’t have access to: income tax withholdings, unemployment insurance, workers’ compensation, mandatory sick leave, and more.[12] Meanwhile, Uber has been defiant.[13] Uber CEO Tony West has stated that the second prong of the employee test isn’t satisfied because “drivers were not a core part of Uber’s business” and that Uber only “serv[es] as a technology platform for several different types of digital marketplaces.”[14]
While many in the labor force see this as a landmark bill with cause for celebration, those who have enjoyed the ability to clock-in at their discretion are worried that this bill will take away that flexibility.[15]
Still, others believe it’s worth it, as the flexibility once offered by Uber has already been taken away by “software and algorithms that share information selectively with drivers.”[16]
Thus, it is unclear how this bill will affect the ridesharing business model, and if drivers will receive any benefit at all. Either way, the pro-employee movement will continue to move forward, and everyone will most certainly have their eyes on California come 2020.
[1] Avery Hartmans & Paige Leskin, The History of How Uber Went From the Most Feared Startup in the World to its Massive IPO, Business Insider (May 18, 2019), https://www.businessinsider.com/ubers-history.
[2] Sara Silverstein, These Animated Charts Tell You Everything About Uber Prices In 21 Cities, Business Insider
(Oct. 16, 2014), https://www.businessinsider.com/uber-vs-taxi-pricing-by-city-2014-10.
[3] Kimberly Amadeo, The Great Recession of 2008 Explained With Dates What Happened and When?, the balance (June 25, 2019), https://www.thebalance.com/the-great-recession-of-2008-explanation-with-dates-4056832.
[4] M. Keith Chen et al., The Value of Flexible Work: Evidence From Uber Drivers, National Bureau Of Economic Research (June 2017), https://www.nber.org/papers/w23296.
[5] See Andrew Greiner et al, A History of Lyft, From Fuzzy Pink Mustaches to Global Ride Share Giant, CNN (March 28, 2019), https://www.cnn.com/interactive/2019/03/business/lyft-history/index.html (showing timeline of Lyft launching in San Francisco in May of 2019).
[6] Nat, An Introduction to Juno Rideshare: Should You Use It? Should You Drive for Them?, ridester
(Nov. 6, 2018), https://www.ridester.com/juno-rideshare/ (“Launched in NYC in 2016, Juno is a ridesharing app that aims to provide a better experience for drivers and riders.”).
[7] A.B. 5, 2019 Leg., Reg. Sess. (Cal. 2019), http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml ?bill_id=201920200AB5.
[8] Sarah Ruiz-Grossman, California Gov. Gavin Newsom Signs Law That Could Upend Uber, Lyft, Huffington Post (Sept. 19, 2019), https://www.huffpost.com/entry/california-law-ab5-uber-gig workers _n_5d79867ee 4b0fc715341ba85.
[9] California Assembly, supra note 7.
[10] See Braden Campbell, A Year Later, Dynamex Still Has Employers Scratching Heads, Law 360 (July 29, 2019), https://www.law360.com/articles/1182974/a-year-later-dynamex-still-has-employers-scratching-heads. See also Dynamex Operations v. Superior Court, 4 Cal. 5th 903 (2018) (establishing original ABC test).
[11] See Campbell, supra note 10 (“The ABC test is also gaining some traction nationally with the proposal of the Protecting the Right to Organize Act, an ambitious labor law overhaul that includes language that would make the ABC test national under the National Labor Relations Act.”).
[12] Alexia Campbell, California Just Passed a Landmark Law to Regulate Uber and Lyft, Vox (Sept. 18, 2019), https://www.vox.com/2019/9/11/20850878/california-passes-ab5-bill-uber-lyft.
[13] Tony West, Update on AB5, Uber Newsroom (Sept. 11, 2019), https://www.uber.com/en-NL/newsroom/ab5-update/.
[14] Katie Orr, Legislature Passes Landmark Bill to Regulate Gig Economy and Boost Worker Protections, KQED NEWS (Sept. 10), https://www.kqed.org/news/11773542/state-senate-passes-ab-5-bill-that-limits-who-can-be-classified-as-contractors.
[15] Kate Conger & Noam Scheiber, California Bill Makes App-Based Companies Treat Workers as Employees, N.Y. Times (Sept. 11, 2019), https://www.nytimes.com/2019/09/11/technology/california-gig-economy-bill.html.
[16] Id.
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