Uber won’t be reclassifying its drivers from independent contractors to employees in light of a new bill that passed in California, largely because the bill doesn’t specifically require them to do so, the company’s chief legal official argued Tuesday.
“Contrary to some of the rhetoric we’ve heard, AB5 does not automatically reclassify any ride-share drivers from independent contractors to employees,” Tony West, chief legal counsel at Uber, said in a press call with reporters. “AB5 does not provide drivers with benefits. AB5 does not give drivers the right to organize. In fact, the bill currently says nothing about ride-share drivers.”
The bill in question, Assembly Bill 5 (AB5), codifies a recent California Supreme Court ruling that makes it much harder for companies like Uber to classify its drivers as independent contractors. It enshrines the so-called “ABC test” for determining whether someone is a contractor or employee. Some form of an ABC test is already law in many states, including Massachusetts, Virginia, and New Jersey.
West said Uber could pass the ABC test because drivers aren’t core to its business. “Under that three-part test, arguably the highest bar is that a company must prove that contractors are doing work ‘outside the usual course’ of its business,” West said. ”Several previous rulings have found that drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces.”
West is correct in saying the bill doesn’t automatically turn every Uber driver into an employee. Much of that work will take place behind the scenes in California’s regulatory agencies where unemployment insurance claims, workers compensation claims, and other individual tests are brought.
But the argument that its drivers “operate outside the usual course of Uber’s business” is sure to raise a few eyebrows. West said Uber intends to follow AB5 should it be put into law next year, but that it will continue to try to prove that it doesn’t fall under its legal framework.
AB5 also exposes Uber to more lawsuits from city and state prosecutors. The bill includes an amendment that empowers the state’s attorney general and any district attorney “of a city having a population in excess of 750,000” to file for injunctive relief if Uber is found to be violating its provisions. (San Francisco’s population is roughly 750,000.)
San Francisco District Attorney Dennis Herrera appears to be interested in such a job. “The state doesn’t necessarily have the resources to handle every case,” he said in a statement, according to the San Francisco Examiner. “City attorneys, district attorneys and other local prosecutors are a force multiplier when it comes to protecting workers and consumers. It makes sense to have effective enforcement. You do that by providing local prosecutors with the legal tools to do the job.”
Asked whether the company could afford a potential tidal wave of lawsuits, West was circumspect. “Uber is no stranger to legal battles,” he said. “I think that’s one reason I have my job.” In other words, Uber is so used to being sued, it’s not clear that AB5 presents any unique challenges in that respect.
West claimed that Uber “never lobbied” against AB5. The company has met with multiple stakeholders, including Governor Gavin Newsom, state lawmakers, and labor unions representing drivers. The company’s proposal to establish a $21-an-hour, on-trip minimum wage for drivers, paid time off, and compensation for drivers injured on the job was rejected by lawmakers before the passage of the bill.
Now the company is planning on dumping $60 million, along with Lyft, into a campaign account to advocate for a ballot initiative in 2020 to ask voters to support the creation of a new classification for ride-share drivers — effectively sidestepping the thorny mess that AB5 presents. West called it a “progressive third way” in which drivers get more protections, while Uber avoids getting saddled with the costs associated with a workforce of W-2 employees.
If Uber ultimately was forced to reclassify drivers, it would most likely limit driver flexibility, West said. “Drivers would not be able to choose when to sign on anytime they want it,” he said. “They would work in shifts like every other employee works in shifts. Drivers would not be able to choose to sign off whenever they wanted to because there would be a set time that they would have to work, they would not be able to do that.”
Experts have said there is nothing in federal or state law that precludes Uber from offering its drivers the same flexibility as employees as they have now as contractors.
Uber clearly is rattled by the passage of AB5. And other states appear poised to take up their own measures regarding gig work, putting further financial pressure on the unprofitable ride-hail company. But West said that regardless of these possible outcomes, Uber would survive.
“This business is incredibly adaptable and has withstood enormous, enormous challenges,” he said. “And it has always come through those stronger and more responsive.”