Pacific Post Assembly Bill 5 (AB5), often referred to as the “Uber law,”will be placed into effect by 2020 in California, which will force gig economy empires to treat their independent contractors as employees. The gig economy — sometimes called the share economy — encompasses app-based ride-shares like Lyft, Uber, and Postmates. This bill has been a major point of contention for both the ride-share companies and the contractors they employ. If you or someone you know is a gig worker, there are several important facts to know about what exactly this bill entails and how it will affect the gig economy workforce. reclassifying drivers or the backlog of employment lawsuits would be passed to consumers, which would result in higher-priced rides in California. An Uber executive had a starker response to the AB5 bill. The executive told Business Insider that it would cause a significant shift in how the company does business. AB5: Good or Bad? November 2019
However, it seems that Wall Street is the one that’s most concerned. Wall Street analysts estimate that, in California alone, reclassifying drivers would cost $3,625 per driver per year. The other costs associated with employing drivers equate to $290 million a year. The 25% increase in drivers’ wages would drive demand to zero. The analysts conclude that this bill would effectively bankrupt both Uber and Lyft. To compromise, Uber has offered a restructure of employee benefits. The first is a guaranteed earnings package that includes compensation for average expenses incurred and a base earning that would start at $21 an hour with opportunities to earn more. There would also be a benefits package that would include paid time off, paid sick leave, and compensation if they are unable to work due to a driving accident. A third party would administer this benefits package, and all ride-share companies would have to pay into it. The last part would be the first of its kind in the U.S.: a sectoral bargaining representation model where drivers have a legal right to negotiate over earnings, benefits, and other decisions. The growing concern for the ride-share community is how this bill will affect their bottom line. For some, the money they make providing rides is supplemental, and for others, it’s how they make ends meet. This new law could provide the benefits these workers are in great need of, provided that demand for their rides doesn’t change. If the concerns of Wall Street, Uber, and Lyft are valid, it could significantly impact our local economy. If the price per ride increases and demand plummets, the drivers and their companies are left without revenue channels, which would ultimately cause unemployment and bankruptcy. How do you feel about the recent bill proposal and what it means for drivers and ride-share companies? Do you think this will hurt or benefit our state economy? Let us know next time you’re in the office!
To distinguish someone as an independent contractor, companies will use the “ABC” test. The three qualifications include all of the following parts: • The worker does not answer to the company in relation to their performance on the job. • The worker performs work that does not fall under the company’s course. • The worker is engaged in an independently established trade. If you do not meet one of the qualifications, you are classified as an employee and have the right to at least minimum wage and excellent benefits. Those benefits include paid sick/vacation leave, workers’ compensation, unemployment insurance, and expense reimbursement. It’s also important to note that employers will pay half of what their employees owe in Social Security tax. These costs would rack up to 30% in additional labor costs, which is why so many ride-share companies are challenging AB5. While the bill doesn’t automatically turn ride-share drivers into employees, gig economy companies are actively fighting against it. At a conference, Lyft CEO Brian Roberts told investors that any increased costs associated with
“While the bill doesn’t
automatically turn ride-share drivers into employees, gig economy companies are actively fighting against it.”
— The Lawyers For Injured Workers
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