California Passes Legislation that May Kill the Gig Economy

California’s Senate approved, with a 29 to 11 vote, to require companies like Uber and Lyft to treat all contractors like employees. According to the New York Timesthe bill should sail through the Assembly, and Governor Gavin Newsom has already indicated that he will sign it.

It fixes the primary function problem

Earlier this year, the National Labor Relations Board (NLRB) ruled that Uber drivers, and similar workers, were, indeed contractors because they

  • Use their own equipment
  • Set their own schedules
  • Are free to work for competitors
  • Are responsible for their own profit/loss

The one problem was that these drivers perform functions that are central to the business’s mission. This law solidifies this and says that because driving is the fundamental function of companies like Uber and Lyft, these people are employees.

This doesn’t just affect these app-based employers. It could affect hairdressers, nail salons, franchise owners, and any number of other contract-based industries.

To keep reading, click here: California Passes Legislation that May Kill the Gig Economy

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11 thoughts on “California Passes Legislation that May Kill the Gig Economy

  1. Disclosure: I’ve worked as both an employee and as an independent contractor. I don’t believe this will “kill the gig economy.” Just because someone is an employee doesn’t mean that they cannot have flexible schedules, etc.

    1. Flexibility is one thing. Hiring, firing, liability, insurance, and the like are a whole other ballgame. Under a gig economy it’s pretty easy to get hired–it’s between you and the customer, with the company acting as a mediator. It’s much harder to get hired by a company directly. Same with insurance–if I’m on company business I’m insured by the company for various things, and therefore have to comply with various rules. If I’m a contractor those are often my responsibility (often with a QC manager making sure I meet the requirements).

      The gig economy thrives on a degree of flexibility that an employee paradigm simply will not allow.

  2. Hope this applies to the Port of Los Angeles “contract” truckers, (also known as indentured servants). For example, “in October 2013, the truck [Samuel Talavera] leased from his employer, QTS, broke down. When Talavera could not afford repairs, the company fired him and seized the truck — along with $78,000 he had paid towards owning it.”

  3. IMO, Uber, like Walmart and other greedmonster companies, has spent more money fighting this than it would cost to take better care of their workers.

  4. @EvilHrLady

    There’s a fundamental issue with the Ubers and Lyfts of the world that has yet to be resolved, regardless of the wording of current law and proposed legislation: Pay. In a true Independent Contractor relationship, the person is free to negotiate his/her own rates/pay just like you do.

    But that’s not really true for the App based folks who are told, this is what we pay, you cannot negotiate it, and hopefully you get some tips. I hope the labor costs for these companies increase and that money is passed on to the employees. They get paid like crap and are dependent on me tipping them. That’s not fair to anybody.

  5. I’m in CA, and I think AB5 (and Dynamex) are absurd. It is what it is, though. I’ll be interested to see how the law affects not only the Gig Economy, but the rates of drunk driving.

  6. “I ride in a lot of Ubers and always ask my driver if they’d prefer being an employee.”

    The questions should be, “Would you like health insurance? Would you like Uber to provide the extra car insurance you need? Would you like Lyft to pay part of the social security taxes you are required to pay? Would you rather not go through the hassle of figuring out self-employment taxes? Would you like the business that is profiting from your labor to pay the entire actual cost of what you provide, which includes a car into which you have invested capital and pay for gas and maintenance?”

    A lot of the people who drive for lyft and uber are very bad at math and don’t understand how much it actually costs them to operate their cars.

    1. So you’re saying that they are too stupid to know what’s best for them? That’s quite insulting (especially since I have a relative and close friend who drive for both Uber and Lyft).

      1. No, I don’t think they are stupid. I think they do not have all the information. And uber and lyft sure aren’t going to give them a worksheet showing them how to calculate the operating costs for the car and help them figure out their net income.

  7. “on-demand companies like Uber and the delivery service DoorDash see their costs rise 20 to 30 percent when they rely on employees rather than contractors.”

    Right. Because suddenly, the total cost of operation is being factored into the price. As it is now, the drivers absorb a lot of the costs and might even be losing money on the deal. If you entire business model depends on exploiting people who are bad at math, maybe you need to re-think your operations.

  8. Uber ad Lyft took the concept of calling for a cab ride and made it a function one does with an app for those who find talking to people problematic. As someone, who dealt with calling a cab service every weekend for rides for 15 straight years, I never trusted using these apps because I wanted a guaranteed pickup, non-shared with others, at a guaranteed time. Because I was getting these rides at a time period when there’s a driver shift in schedule, I would get a callback anytime there was a slight delay (more than 5-minute wait). With these app-based rides calls, you (the rider) don’t know if there’s a driver available in your area, as drivers pick and choose their schedule, with no real knowledge of the exact number of drivers working. (Drivers have to sign in to the app to show availability and get links to pickups requested in their vicinity). This is why I don’t trust Uber or Lyft because they can’t tell how many drivers are signed on using the app for pickups by exact times. This is where they got into trouble in NYC (Manhattan) because they don’t know the exact numbers of drivers available and usually are oversaturated in one area and understaffed in other areas. Yes, I know they advertise that the driver can stay in a given area, (hopefully close to home) but in the example of Manhattan, there was already a Medallion Taxi service in place, which works with a certain number of drivers on (scheduled) per diem times. Instead of telling the drivers who want to work for Uber and Lyft that they have to be on a lottery system for a certain number of spots in a given area, they allow any driver to enter into the area if they are signed in.
    Having said that, both of these companies Uber and Lyft have a long way to go as far as the way they sign-on drivers for the app because they have placed all expenses and ability to earn wages on each driver without letting them know the full facts in a clear transparent matter. I am not saying they have to teach them how to understand what is needed to be successful but they do need to eliminate the lack of full exposure of what it means to be a driver for the app–in terms of when they have more need of drivers for the drivers to schedule themselves, exactly how the drivers earn their paycheck, minus any fees for use of equipment (car), how tolls on highways are paid (as part of the customer fee or on the driver), who covers the fuel costs (company or driver) and how are tips earned through the different payments used by customers. I always find out the cost of my cab trips prior to getting the pickup and question how the company pays the tip to the employee because some places don’t give the tip if given through a credit card. Uber and Lyft just made it public that they don’t pass the tips on to the customers directly.
    With all the technology being used by these companies, these issues should have been figured out within the first month of the startup. Someone was enjoying the money rolling in to fix this and now both companies have major problems. As I see it, they did it to themselves.

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