Skip to main content

California Senate passes bill to limit the gig economy

California Senate passes bill to limit the gig economy


The bill makes new rules about who counts as an employee

Share this story

Photo by Amelia Holowaty Krales / The Verge

The California Senate has passed legislation that will make it more difficult to classify workers as independent contractors, according to the San Francisco Chronicle. The bill, AB5, will go back to the state Assembly, where lawmakers will have to approve new amendments. If it goes into effect, it will drastically change gig-economy companies including Uber and Lyft.

Should the bill pass the Assembly, Governor Gavin Newsom will almost certainly sign it. On Labor Day, he wrote in The Sacramento Bee that the misclassification of workers — where people are wrongly dentified as independent contractors rather than employees — was contributing to wealth inequality. “I am proud to be supporting Assembly Bill 5, which extends critical labor protections to more workers by curbing misclassification,” he wrote.

Even if Newsom signs, that may not be the end of the wrangling

If the bill passes, workers from companies such as Uber, Lyft, DoorDash, Instacart and Postmates could likely become employees on January 1st, 2020. So too could some taxi drivers, translators and interpreters, and plenty of others, according to The Chronicle. Unions have supported the bill. Passage in California could also embolden other states to pursue similar legislation.

The law expands a California Supreme Court decision that uses a formula, the ABC test, to determine whether a worker is an employee or contractor. The criteria are as follows: Workers whose tasks aren’t performed under the company’s control, are performing work outside the company’s main business, and have their own independent enterprise in their trade are contractors.

The bill’s supporters — like Newsom and Assembly member Lorena Gonzalez, who introduced it — say that companies misclassify workers to avoid paying minimum wage and a range of benefits such as worker’s compensation. Opponents, including ride hailing companies, say that the added costs from employment will hit them hard.

“Today the so-called gig companies present themselves as the innovative future of tomorrow, a future where companies don’t pay Social Security or Medicare,” said Maria Elena Durazo, a California State Senator who co-authored the bill. “Let’s be clear, there’s nothing innovative about underpaying someone for their labor.”

Even if Newsom signs, that may not be the end of the wrangling. After unsuccessfully trying to be excluded from the bill, Uber, Lyft, and other gig companies will try to win over voters with a 2020 ballot initiative to create a new classification for workers. “We are fully prepared to take this issue to the voters of California to preserve the freedom and access drivers want and need,” Lyft said in a statement.