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Tue05262020

Last updateMon, 20 Apr 2020 1pm

To understand California’s climate-change challenge, look no further than its popular ride-hailing companies.

Uber, Lyft and other companies make up a tiny piece of the biggest greenhouse-gas polluter in the state: transportation. Yet their contribution to climate-warming emissions is outsized, drawing attention from researchers and lawmakers and raising an ambitious question: How can the state rein in emissions from gig economy companies built on drivers who own their vehicles?

The latest strike against Uber and Lyft comes from the Union of Concerned Scientists, an advocacy group that published a report in late February showing ride-hailing trips release 69 percent more climate-warming emissions than the walking, biking, transit and other car trips they displace. The findings support California’s own analysis, which concluded ride-hailing increases carbon dioxide pollution by 50 percent for every mile a passenger travels, compared to when they drive themselves.

The state took action in 2018, passing a first-of-its-kind law to curb that carbon pollution. It tasked the California Air Resources Board with setting targets to increase electric-vehicle miles within ride-hailing companies and to cut carbon dioxide for every mile a ride-hailing passenger travels. The California Public Utilities Commission must then enforce those rules when they take effect, which is slated for 2023.

California’s cars, trucks, planes and trains produce about 40 percent of the state’s greenhouse gas emissions. Ride-hailing makes up a small fraction of that, accounting for 1.2 percent of the miles Californians travel by car. Still, the issue illustrates a much bigger challenge, said Daniel Sperling, director of the Institute of Transportation Studies at UC Davis and a member of California’s air board.

“In some cases, we’re picking on them, with laws and rules like this. But on the other hand, it’s kind of a first step towards doing good, sustainable transportation policy,” Sperling told CalMatters. “They’re the guinea pigs.”


Why Is California Regulating Ride-Hailing?

Ride-hailing vehicles don’t pollute more than the rest of the cars in the state, but the distance they travel between rides makes them a problem, according to the Union of Concerned Scientists and the air board.

In fact, the ride-hailing fleet is more fuel-efficient on average, since it tends to consist of newer cars, more hybrids and more passenger cars rather than light trucks, according to a December report from the Air Resources Board.

While travelers driving themselves tend to go directly to a location, those working for ride-hailing companies drive extra miles between ride requests, or on the way to pick up a passenger. Those extra miles—when the driver is alone in the car—are called “deadhead miles,” and they make up almost 40 percent of the distance driven by ride-hailing vehicles.

For some drivers, that number is even greater.

“I’m a part-time driver, and I only drive during high demand times, like Friday night, right? And still, I would say that I have about a 50 or 60 percent occupancy rate,” said Nicole Moore, a Lyft driver and organizer with Rideshare Drivers United. “On a Friday night in the middle of Hollywood, I’ll have an empty car for like half an hour. Then I’ll get a 10-minute ride, and that’s it.”

Though ride-hailing makes up a small fraction of all California car miles, its impact is visible. Ride-hailing alone is responsible for about half of San Francisco’s rise in traffic congestion from 2010 to 2016, according to the San Francisco County Transportation Authority. And it’s growing—while rides with taxis, ride-hailing and car-sharing make up less than 5 percent of vehicle miles traveled globally today, that number could be 19 percent by 2040, a report from Bloomberg New Energy Finance projected.

“We know that that sector is growing,” said Joshua Cunningham, branch chief of advanced clean cars at the Air Resources Board. “Putting in a regulation to start controlling those emissions is really important.”


Setting Statewide Goals

That’s where the law requiring the air board to set carbon dioxide and electrification standards for ride-hailing fleets comes in. Authored by Democratic state Sen. Nancy Skinner of Berkeley, it also tasks the California Public Utilities Commission with enforcing the rules and requires the ride-hailing companies to figure out how to meet them.

“We’re serious about our environmental impact,” Uber representative Austin Heyworth said at a recent air board meeting, where he expressed Uber’s support for the law and the air board’s efforts. Lyft, in a statement, said it is “striving to make every ride 100 percent electric over time.”

Others, however, are pushing a more ambitious strategy: electrify within the decade.

Environmental groups including the Union of Concerned Scientists and Sierra Club California urged the board at a January 23 meeting to evaluate what it would take to fully electrify ride-hailing fleets by 2030. The board directed staff to look into it.

Achieving zero-emission fleets, however, could be complicated in the gig economy. Because drivers typically own the vehicles they use, “fleet costsfall directly on the driver—gas, electricity, maintenance, everything and the cost of the vehicle,” said part-time Lyft driver Moore. Ride-hailing companies will have to curb emissions from cars they don’t even own.

It’s not the first time California’s heard this full-electrification idea. An early version of the 2018 bill included a requirement that ride-hailing companies shift to all zero-emission vehicles by 2030. Uber and Lyftlobbied successfully to remove it, citing concerns that low-income drivers would not be able to afford an electric vehicle, according to Streetsblog California.

Skinner said she wants to see the board take bold action in setting standards that will help clean California’s air and combat climate change.

“I want them to set the most ambitious goals possible and feasible,” Skinner said.

Still, air board staffer Cunningham called 100 percent electrification an “aggressive target.” While Cunningham was reluctant to speculate about the staff’s final assessment, he said in an email to CalMatters, “it is unlikely staff will determine that 100 percent electrification in 2030 is feasible.”


What’s Next?

Electrification is not the only way to decrease ride-hailing emissions. The Union of Concerned Scientists’ report also advocates for increasing shared rides and incentivizing trips that connect to public transit or bike or scooter shares.

Promoting connections to public transit is something the California Air Resources Board already is talking about. One idea is to reward ride-hailing companies for voluntarily connecting to transit or other low-carbon forms of transportation, like scooters or bikes, by giving them “regulatory credits” that count toward their emissions requirements, Cunningham said.

Gregory Erhardt, assistant professor at the University of Kentucky, said there are “a lot of good reasons to be skeptical” of the notion that ride-hailing benefits public transit, however. Erhardt, who has studied public transportation ridership, said ride-hailing discourages commuters from using public transit and fills the road with more cars.

After hitting a peak in 2014, transit ridership in the United States began to decline. “Now, that drop-off is strange, because this is during a period in which the economy is strong; there are more jobs; and it’s during a period in which transit agencies are really expanding their service,” Erhardt said. “We would expect ridership to be going up and not down.”

Ride-hailing may have played a part: Erhardt found that public-transit ridership decreased when ride-hailing was introduced to an area, according to a study published in 2019. (A recent uptick in national transit ridership can be attributed to isolated growth in the New York City and Washington, D.C., regions, but even there, the cities didn’t beat their record high numbers.)

While the Union of Concerned Scientists study concedes that “today, ride-hailing competes with and draws riders away from mass transit,” it argues that the companies could promote connections to it. In some areas, Lyft and Uber provide information in apps about public-transit options, and in Denver, travelers can pay for public-transit rides through the Uber app, according to the Union of Concerned Scientists report.

Erhardt said the new report offered “promising paths forward.” To make these happen, however, the companies likely will need a push. In California, as the Air Resources Board crafts its regulation, the coming year will determine just how far the state will go to address the climate impact of ride-hailing.

“There’s not an incentive, without that regulatory push,” Erhardt said. “That’s the sort of lever that we need to incentivize people to change their behavior, both the companies and the travelers.”


‘You Have to Pull Drivers Up’

Don Anair, research and deputy director of the clean vehicles program with the Union of Concerned Scientists and co-author of the recent report, said the responsibility to address ride-hailing emissions “squarely falls on the companies.” Even though they do not own the fleet vehicles, Uber and Lyft could incentivize drivers to buy or lease electric cars, he said. He also suggested the companies encourage pooled rides by adjusting prices so more passengers want to share a trip.

Some ride-hailing companies already are experimenting with initiatives to make zero-emission vehicles more available to drivers. Last year, Lyft launched an electric-vehicle rental program for drivers in Denver with a fleet of electric Kias. Rental prices increase with distance driven, starting at $230 a week.

Part-time Lyft driver Moore called these rental programs the “indentured servitude of the rideshare” because of how long it takes to earn enough money to pay off the rental fee. Representatives for Lyft and the Union of Concerned Scientists told CalMatters these rental programs could lower barriers to driving cleaner cars.

With time, the price of electric vehicles will go down, Anair said, and more used electric vehicles will enter the market. But right now, the steep up-front cost makes them unaffordable for some drivers, even though maintenance and fuel generally are cheaper than for gasoline vehicles.

That’s why Moore said that focusing solely on the cars won’t be enough. Moore drives a hybrid now, and it’s the first new car she’s ever bought. If she had to buy an electric vehicle, she “would have to quit driving and find another way to pay the bills,” Moore said. “You have to pull drivers up at the same time you pull standards up for their cars.”

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Environment

Julie Su wants the world’s fifth-largest economy to remain a global juggernaut. To do so, California’s labor secretary acknowledges, the state will need to position its workforce for the jobs of the future—a catchall term that encompasses not only the promise of innovation, but also the dystopian threat of increased income disparity.

Economists project massive upheaval from disparate forces such as automation and an aging population. California’s challenge, as Su sees it, is to roll with those disruptions while making sure jobs here continue to pay a living wage, offer worker protections and accommodate working families.

In short, she wants the future of work to bridge today’s wealth gap. A labor and civil rights attorney—and past recipient of a MacArthur Foundation “genius” grant—Su has been leading the Future of Work Commission alongside Chief Economic Adviser Lenny Mendonca and Senior Adviser on Higher Education Lande Ajose. They have been hosting meetings across the state with the goal of coming up with a new social compact for workers.

Meanwhile, Su—whose full job title is secretary of the California Labor and Workforce Development Agency—has committed to a new future-of-work department to execute the commission’s findings and recommendations. In an interview, edited here for length, she spoke about the commission’s goals and how she plans to enforce California’s own recent workplace disruption—the new worker classification law known as AB 5.

What are we looking at in terms of future of work? And why should Californians care about this topic?

We hear so much about how A.I. (artificial intelligence) is going to destroy jobs, such as how a robot will take the place of humans. But the commission was formed under the principle that there’s nothing inevitable about the shape of our future economy. We can, through policies and interventions … come together to reverse the 40-year trend of growing income inequality and poverty.

What’s your understanding of the distribution of wages right now, whether it’s gender, race or geography?

Over one-third of working people in California make less than $15 an hour. And a full 20 percent of those earning less than $15 have a college degree or some college education, which forces us to think about the connection between education and job opportunity, right?

It’s not enough to address the cost of things; we also have to address how much people actually make, so we have to focus on the quality of jobs.

Over the last 40 years, productivity has increased by 259 percent, but wages only by 11.6 percent, which means that we have a massive distribution problem. The productivity gains are going somewhere, but they’re not going to working people. And that’s creating not just income disparity, but also wealth disparity.

And the racial wealth gap is astounding. The median wealth of black families who have a college education is below the median wealth of white families who do not have a college education. Those are the problems we need to solve.

So what are examples of solutions?

I don’t want to pre-suppose what the commission’s going to come up with. I think that there are some policies, strategies and ideas that have been tried and we just need to expand them. We’re looking here and elsewhere in the world. What lessons do they have for California? And then, I think that there are ideas and solutions that sitting here today we have not yet imagined.

Can you at least tease me with an idea?

For example, at the first meeting, the commission had a panel of four workers, and one had a union job where she worked as a janitor. The union job actually helps to preserve her security, but that job was also subcontracted out, and when it was, she’s lost certain things like a retirement benefit.

So clearly, one part of the answer is: What is the role of union? And how do we ensure that unions are strong and can organize and, given changes in the economy, are supported in new ways of organizing? There’s data that shows that having a union does more to ensure higher wages than even having a college degree.

The second was a warehouse worker who talked about how he basically felt like a number. Automation was used … to set a high level of surveillance, and he felt expendable. So what ways can technology innovate, not just for the benefit of the shareholders and consumers, but for the benefit of working people?

Then the other two workers who spoke were in workplaces, both of whom have received money from the Quality Jobs Fund, a collaboration between the Federal Home Loan (Bank of) San Francisco and the New World Foundation. And the fund was used for capital investments in companies that meet certain job-quality criteria. These two workers both talked about how their jobs allow for a living wage, have flexibility—one of them had a special-needs child and needed to go to appointments—(and) that include benefits, access to training and professional development, and then upward mobility and a chance to build wealth.

All those suggest higher labor costs for employers, though. Is there a point where government then starts to subsidize private industry in order to provide a private-sector worker with better wages? Is that a direction we should contemplate?

I think everything is on the table. What the governor has charged the commission with is to think really boldly, not assume that anything that’s already in place has to be here or that anything we haven’t yet seen is impossible to create.

In parallel to the commission, we’re also creating a future-of-work department under the labor agency. We’re going to create a department that will be poised when the commissions has its recommendations to actually execute many of them. That’s how concrete we want to be.

Part of the initial phase of the department is really just to realign existing service inside of government. One of the things that I think is very frustrating to people who try to interact with the government and try to access services, is when we say to you, “not this agency, the next agency.” What I want to do is eliminate the next window problem: “You’re in the wrong line, go to this next line.”

You want to create one line in which people can get what they need when they seek help from the government. It’s not just about creating new legislation and new powers; it’s about taking powers you already have and creating one streamlined, efficient and accessible department.

The governor signed AB 5, the worker-misclassification bills, and it will now take effect in January. I’m wondering what will you and your agency’s role be in enforcing that?

I often say that the instability that working people face—partly because of misclassification—has resulted in the day-labor-ization of our economy. Instead of steady, consistent, reliable work, people end up basically in odd jobs, and you’re hustling all the time, right? So AB 5 is meant to address that kind of misclassification so that we can bring more people who should be under the protection of our labor laws back on that floor.

We’re going to be enforcing both through our wage-claim process, where individuals who feel like they have been misclassified can come and file wage claims. An example of that is we’ve had almost 1,000 cases in the port-trucking industry filed before the labor commissioner that we’ve adjudicated and found millions of dollars owing to truck drivers who have been misclassified.

The other is just doing investigations and audits. That will be on both wages and tax, because AB 5 expands the ABC test that way. So we will be doing investigations and audits so that those who want to comply with the need to reclassify can do so, and those who don’t will understand that’s not the kind of economy we want in California. So we can issue citations and demand both wages and taxes and other kinds of penalties.

Do you expect to investigate Uber and Lyft?

We do not talk about who we will investigate or the fact we are investigating. I do want to say that misclassification did not arise when the gig economy came into being. And it will not be ended by that. We also are hopeful that there are businesses who will join us in this administration who are committed to combating misclassification and also find new ways for workers to organize.

There are some workers who have been excluded from federal protections, and California has a really unique opportunity to bring them into the fold and think about ensuring that they have true union protection working side by side with labor and businesses who are interested in doing that.

Did you have conversations with Uber, Lyft, DoorDash, Postmates or any other entities?

We did. I think we always want to work with—whether it’s business or labor—on trying to solve some of these complex and intractable problems. As the governor said when he signed AB 5, we want to continue to be open to those conversations and whatever possibilities they might bring about for trying to improve working conditions and the lives of the drivers in California.

Why wasn’t a third way accomplished in the last legislative cycle? Why couldn’t a compromise be done?

That’s a good question. We wanted to make sure we were working with folks who wanted to talk about this, but I don’t think there was a deadline in our minds for that. These ongoing issues; they’re very complex. And when we talk about creating a voice for workers, that it’s really a voice premised on unions—like a genuine right to a union on the job. If we can accomplish something, it will set a model for the country. 

What’s realistic for the state or local government to stem this growth in wealth inequality? You’re setting up high expectations here. We have a capitalistic society, so what’s doable here?

We would rather set really high standards for ourselves. And if we cannot reach them all, we at least challenge ourselves to give it everything we’ve got. We are looking at this from all angles. There may be some simple things that we can do. Some of them are building off the great innovation and talents of people in California already. Are there models we can replicate and support and share so that people who want to do this right don’t have to invent it from scratch? At the first meeting, we talked about tax law, about social structures.

We don’t have an end date for the commission’s work. We have monthly meetings from now until April. We will also be issuing a report in May that’s a part of the governor’s executive order. We’d like to make sure we engage with a broader segment of Californians around what whatever the recommendations are, and that could be academic institutions, philanthropy, worker centers, the tech industry and business. 

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Local Issues

Doctors, real estate agents and hairdressers can keep their independent contractor status—but not truckers, commercial janitors, nail-salon workers, physical therapists and, significantly, gig economy workers, who will gain the rights and benefits of employees in California under sweeping workplace legislation passed this week.

Gov. Gavin Newsom has committed to signing the bill, which cleared the Assembly 56-15 in a challenge both to the longstanding trend toward outsourcing labor and to the business model of companies such as Uber, Lyft and DoorDash, who have threatened a $90 million fight at the ballot box.

Once signed, AB 5 would upend longstanding employment practices that have seeped into the Democratic presidential debate about how workers should be treated, particularly in today’s gig economy.

“With one clear test across our state labor laws, we will raise the standards for millions of workers and ensure they gain access to critical rights and benefits,” said Sen. Maria Elena Durazo, who presented the bill in the Senate on Tuesday night. “We can make California the global leader in protections for gig workers, janitors, construction workers and so many working people who can’t even pay their rent.”

Lyft spokesman Adrian Durbin said lawmakers missed an opportunity to find a flexible solution for rideshare drivers, and Uber announced it was ready to pour millions more into the ballot fight. “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,” Durbin said.

From the beginning, the bill’s author, Assemblywoman Lorena Gonzalez, a labor organizer and a Democrat from San Diego, made it clear her goal was to improve wages and workplace standards, and expand the right to collective bargaining at a time of growing income inequality.

She acknowledged more work remains but insisted the legislation is needed to establish a state standard after the California Supreme Court, in a landmark 2018 decision, created a strict test for certifying independent contractors, with the highest hurdle being that the work performed must be outside of the core of the company’s business. It’s commonly referred to as the Dynamex decision.

In advance of the vote, she shared a picture of a sentence plastered to the top of a wall in her office: “The Most Amount of Good for the Most Amount of People.”

California’s pushback against the gig economy intensifies pressure on Silicon Valley flagships such as Lyft and Uber, which were already trading below their IPO share prices amid investor concerns about the difficulty they’ve had turning a profit, despite many millions of users. Uber cut 400 people from its marketing team in July, reported a quarterly loss of $5.2 billion in August and sent layoff notices to another 400-plus workers this week.

On Wednesday, Uber chief legal officer Tony West said in a press call that the company plans to fight the tougher employment test once AB 5 takes effect next year. “We still may pass the test,” he said. “We believe we can pass the harder test.”

But concerns around basic worker protections also have become pressing in California, where one worker in three earns less than $15 an hour; also, the 18.2 percent poverty rate, when the cost of living is taken into account, is rivaled only by that of Washington, D.C. As lawmakers were debating AB 5, in fact, a commission on the future of work, appointed by Newsom, was convening not far away in Sacramento to address such issues as the proliferation of low-wage jobs, automation, artificial intelligence and the gig economy.

Aside from the philosophical questions around AB 5, the state estimates it loses about $7 billion a year in payroll taxes due to worker misclassification that could be supporting schools, roads and other public services. Supporters of the bill argue that by avoiding unemployment insurance taxes and workers’ compensation premiums, businesses shift the burden to the state—and its taxpayers—when workers get laid off, get sick or get injured on the job.

Opponents warned the bill will invite trial lawyers to file frivolous lawsuits against thousands of California businesses and called the bill a blatant power grab by big labor.

“This bill is the union caucus’ main event of the year,” said Republican Sen. Jeff Stone, who held up an exemption request form, obtained by CalMatters, that labor groups had been presenting to industry advocates seeking a carve-out.

Industries as varied as trucking and health care also pushed back, arguing that the legislation would rewrite the rules for independent workers whose status has worked for them for decades.

“AB 5 does not take into account the more than 70,000 California truckers who have built their business around the independent owner-operator model, invested hundreds of thousands of dollars in their trucks and have made the decision to run their own businesses,” said Shawn Yadon, CEO of the California Trucking Association, before the bill passed.

Hospitals, too, are worried the bill will not only cause confusion, but may have the unintended consequence of delaying patient services. Gail Blanchard-Saiger, vice president of labor and employment at the California Hospital Association, said although doctors, psychologists and podiatrists are exempt from AB 5, and hospitals employ more than 90 percent of their workforce, many medical professionals such as physical therapists and certified registered nurse anesthetists are contracted at small and rural hospitals where volume is low.

“The impact on the hospital for these health professionals is probably a delay in services, and in particular rural communities, maybe a reduction in services,” said Blanchard-Saiger.

Among the other health professionals not exempt under AB 5: occupational therapist, speech therapist, optometrist, nurse practitioner, physician assistant, radiation therapist, licensed professional clinical counselor, marriage and family therapist, licensed clinical social workers, respiratory therapists and audiology.

In the final weeks of the legislative session, gig companies unsuccessfully campaigned heavily for a new, first-in-the-nation framework that would allow their workers to remain independent while offering a wage floor and some kind of bargaining tool. And on Tuesday, Newsom told The Wall Street Journal that he is still talking to Lyft and Uber, “and regardless of what happens with AB 5, I am committed, at least, to continuing those negotiations.”

The San Francisco Chronicle reported potential legislation calling for a new category of workers—to be known as “network drivers”—to cover rideshare and delivery service drivers, guaranteeing at least 1.27 times minimum wage, reimbursement of 30 cents a mile and contributing 4 percent to a Drivers Benefits Fund to purchase workers compensation insurance and other benefits.

Uber and Lyft say the codification of the Dynamex decision—that established a three-part test for certifying contractors—will force them to fundamentally change their hiring practices. It likely means the rideshare industry will take on fewer drivers and assign shifts, giving drivers less flexibility.

Labor representatives called it a scare tactic and said nothing prevents companies from maintaining flexibility for workers.

In shifting to employee status, companies would have to offer basic worker protections such as guaranteed minimum wage, overtime pay, contributions to Social Security and Medicare, unemployment insurance and disability insurance, as well as workers’ compensation, sick leave and family leave. Workers could also get reimbursed for mileage and maintenance of their vehicles, which doesn’t happen now.

The bill triggered several rounds of protest at the Capitol with Uber and Lyft drivers circling downtown Sacramento one day, followed by truckers honking their heavy-duty trucks the next day.

Under the final version of the bill, doctors, dentists, lawyers, architects, engineers, accountants, insurance agents, real estate agents, hair stylists and barbers received exemptions. Travel agents, graphics designers and grant writers will continue to offer their professional services without disruption. Licensed cosmetologists and barbers that set their own rates and schedules won’t change. Commercial fisherman are exempt until 2023. Tow-truck drivers affiliated with the American Automobile Association got a carveout. And freelance writers and photographers can continue, provided they don’t submit more than 35 submissions to an outlet a year.

On the other end, AB 5 captured the industries targeted by labor: gig workers; big-rig, Amazon and other truck drivers; and low-wage services ranging from janitors to home health aides. Unlicensed nail technicians, language interpreters, musicians, strippers and even rabbis could be impacted.

If approved, the bill will take effect in January and gives the state attorney general and large cities the right to sue companies that don’t comply. San Francisco City Attorney Dennis Herrera and Los Angeles City Attorney Mike Feuer both say they would ensure workers are treated fairly.

“The city attorney welcomes the new authority, and if enforcement action is needed under the new law, he will exercise it,” said Feuer’s spokesman, Rob Wilcox.

During debate before the Senate vote, Republicans sought to include hostile amendments aimed at expanding exemptions for newspapers, physical therapists, the timber industry and more. Each was tabled by Democrats who control both houses of the Legislature.

Gonzalez, however, did agree to exempt the newspaper industry from converting carriers for one year.

“While I personally disagree with this delay, I’m willing to allow the newspaper industry the additional year to comply if it means those delivery drivers and nearly a million other misclassified workers are provided the minimum wage, benefits and workplace rights of Assembly Bill 5,” she said.

A few industries did get the exemption they sought, such as builders and contractors. Peter Tateishi, CEO of the Associated General Contractors of California, said his organization ended up backing the bill after being allowed to contract with other contractors under a business-to-business carve-out.

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

Do you freelance in California? Have a side hustle? Drive trucks? Work construction? Do nails? Work on political campaigns? Then you should be paying attention to a major employment fight coming to a head in Sacramento.

In the coming weeks, the state Senate will begin hearings on a bill that will make it harder to classify workers as independent contractors, officially codifying a sweeping 2018 California Supreme Court decision. The so-called “Dynamex” bill, supported by organized labor and named for the court case, has made headlines for threatening the on-demand business model made popular by the likes of Uber, Lyft, DoorDash and Postmates.

Less discussed, however, is the extent to which Assembly Bill 5 could sweep up some 2 million workers across industries far from the sharing economy and tech sectors, from truck drivers and general contractors to nail salons, strippers and perhaps even the freelance writers for this newspaper. The proposal has so unsettled mainstream businesses that they’ve banded together with sharing economy disruptors to run an “I’m Independent” campaign.

The legislation would rewrite the rules for when a worker is deemed an official employee, upending longstanding employment practices by winemakers, private investigators, music schools and other enterprises.

“Does AB 5 have very wide repercussions? Yes, that’s what makes the negotiations very complicated,” said labor-rights attorney Bill Sokol, who teaches employment law at San Francisco State University and is not a part of the negotiations.

California has long led the nation on employment practices, and AB 5 may be just the beginning as policymakers wrestle with updating labor codes in today’s app-for-hire world. Though the high court decision clearly raised the bar for treating workers as independent contractors rather than full employees, the devil is in the details that will be spelled out in the pending legislation.

AB 5 is being lobbied heavily both by business advocates and by organized labor, which seeks to ensure that gig-economy workers have workplace protections, including the right to collective bargaining. It has also put Gov. Gavin Newsom, who wants to be viewed as an ally to both labor and tech, in an awkward position.

“Everything is up for grabs,” Sokol said. “There’s no way to predict who’s going to end up with what. But labor recognizes that the American workplace they have traditionally organized—those worker relationships—have changed, and the laws have not kept up with them.”


Labor groups led by the 2 million-member California Labor Federation have united behind the proposal to limit the use of independent workers. Their contention: The gig economy has opened the door to mass exploitation of low-wage workers, a trend that is worsening income inequality.

Too many employers misclassify employees in order to cut costs, the unions argue, and strong curbs on the use of independent contractors, who aren’t eligible for many of the benefits and workplace protections mandated for regular employees, would slow that. Those curbs would also make it easier to reach groups, such as general contractors, that have long been difficult to organize.

But business advocates warn the change would dramatically ramp up labor costs in California, and have dire consequences for the state’s economy. In some sectors, such as ridesharing, widespread contracting isn’t even the long-term business model—it’s just an intermediate phase on the way to automation. Uber or Lyft, both headquartered in San Francisco, might stop operating in California altogether, they say.

Their hope is to carve out a third way that would allow employers to grant some benefits without having to categorize workers as full employees.

“We have a completely different economy,” said Jennifer Barrera, executive vice president at California Chamber of Commerce. “We have a huge group of individuals who really value their flexibility and control over their own schedule, and I don’t think it has to be one or the other.”

The California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles dealt with a same-day courier service that, to save money, had converted all its employees to independent contractors. A former employee claimed the shift was a Labor Code violation, and the litigation that ensued ended up reinterpreting a longstanding test for classifying workers. The ruling instead established a three-part test for certifying independent contractors, with the highest hurdle being that the work performed must be outside the core of the company’s business.

Even though the Dynamex decision is already law, labor representatives say many companies have been flouting it. AB 5 would ensure that workers would not have to file suit on a case by case basis to seek enforcement.

“There’s a whole bunch of things that they’re currently being cheated out of, frankly,” said Steve Smith, with the Labor Federation. “With respect to Uber and Lyft, it’s the exploitation they subject their workers to on a daily basis. Many of these workers are not receiving minimum wage; they are misclassified as contractors when they actually should be considered employees, meaning there’s a whole host of benefits they’re not getting that they should get like everyone else.”

In steering more people to employee status, the bill would force companies to offer basic worker protections such as guaranteed minimum wage, overtime pay, contributions to Social Security and Medicare, unemployment and disability insurance, workers’ compensation, sick leave and family leave. Workers could also get reimbursed for mileage and maintenance of their vehicles.

The state estimates it loses about $7 billion a year in payroll-tax revenue due to worker misclassification that could be supporting schools, roads and other public services. And by avoiding unemployment insurance taxes and workers’ compensation premiums, businesses shift the burden to the state when workers get laid off, get sick or get injured on the job.

“These billion-dollar companies can complain, but we have to ask ourselves as taxpayers: Should we subsidize their business by subsidizing their workers?” said Assemblywoman Lorena Gonzalez, a former labor organizer from San Diego who is author of AB 5. “That’s what happens when you don’t adequately compensate workers.”

She dismisses the idea that Uber and Lyft will flee the fifth-largest economy in the world. More likely, the lawmaker predicts, Uber and Lyft will make the changes required by law, because there’s a massive market for transporting individuals and goods in California. If they can’t manage it, she says, then someone else will.


Gonzalez’s bill is triggering pushback in part because the impact of the high court ruling is far broader than many Californians expected. Gonzalez says she’s heard, for instance, from newspaper publishers who want to keep using freelance journalists and beauty salons that rely on nail technicians. She’s even rattled folks in her own world of politics, because her bill would reclassify campaign workers as employees, not contractors.

Chris Shimoda, vice president of government affairs with the California Trucking Association, says trucking has been a pathway for people without advanced degrees to make more money. In fact, about 80 percent of drivers in the industry have a high school education or less, he said. But if firms are required to employ their own drivers, independent drivers who own their own $150,000 Class 8 heavy duty trucks may not be able to find work.

“We all agree there should be a pathway, especially for the blue-collar working class to rise up the economic ladder,” Shimoda said. “It’s just: What are the rules for the labor and employment law side of things? If there are specific things that have been abused, then what are those, and how do we reconcile that through this bill?”

As his association works to ease the potential impact of AB 5 on those drivers, the trucking industry has challenged the Dynamex decision in federal court, arguing that federal laws governing motor carriers pre-empt the state test.

Peter Tateishi, chief executive officer of the Associated General Contractors of California, which represents construction firms, said the bill would disadvantage small businesses, many of which are women-owned and minority-owned firms, that subcontract with builders, because contractors won’t be able to get outside help.

As for Uber and Lyft, the rideshare companies have sought compromise and held back-channel negotiations with the Teamsters and Service Employees International Union. The Labor Federation, however, remains committed to full employment status for rideshare workers. As a result, the gig economy companies have sought support in the court of public opinion.

In an open letter, Uber Chief Executive Dara Khosrowshahi and Lyft co-founders Logan Green and John Zimmer proposed maintaining their drivers’ freelance status but granting access to some employee benefits such as paid time off and retirement accounts. The executives, whose combined worth is over $1 billion, offered to form a new driver association to advocate for the drivers’ interests.

“We are public companies that tens of millions of people rely on for mobility and work,” they wrote. “If there ever was a time for new policies, it’s now.”


This week, the “I’m Independent” coalition led Uber and Lyft drivers around the Capitol to meet with lawmakers and staff to voice their desire to remain freelancers.

“I’m very offended that they would think they’re doing us a favor by calling us employees,” said Vivian Mallory, a 60-year-old Uber driver in Sacramento. “We want better rates, and we want more opportunities for benefits. I think we’re not against the bill being passed, but I think we want changes in the language.”

Mallory says she’s strategic about picking up longer rides that pay more and was able to average $4,800 a month last year driving. Another Uber driver, James Kyle, 58, of Roseville, said he needs to remain an independent contractor, because he works seasonally at charity golf tournaments.

“They’re taking the fun away from it,” Mallory said.

AB 5 supporters counter that drivers will continue to maintain a flexible schedule, because rideshare companies, like any employer, can pay wages based on the number of hours worked.

On the other side are drivers like 62-year-old Ann Glatt, who joined the Gig Workers Rising movement after noticing her share of fares declining over time with Lyft. She says she’s lucky to make $700 a week and would like to see changes to the way the rideshare companies categorize their drivers.

“Teachers are in unions. We’re not able to unionize because we’re independent contractors,” Glatt said.

She added that the labels put on drivers can be misleading.

“Uber and Lyft are not transportation companies—they are platforms. So that makes us customers, and the passengers are the end user. But really it kinda just means Uber and Lyft are not responsible for basic labor standards for people,” she said.

After speaking to CALmatters, Glatt said she stopped driving Lyft because she wasn’t able to make ends meet.

Requests for exemptions have so far succeeded in some sectors. Gonzalez has agreed to leave doctors, insurance agents, real estate agents, hair stylists/barbers who hold a booth rental permit, dentists, architects, engineers and accountants out of the law.

But business interests are pressing for more. Barrera said CalChamber would like to carve out licensed occupations, from court reporters to family therapists. While the author is committed to sorting through more positions, Gonzalez said the exemptions will need to stop at some point.

“I have a driver’s license,” she said. “That doesn’t make me a business owner.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics