【Sarah Shevon Archives】

A California bill could Sarah Shevon Archivesbe a game-changer for Uber, Lyft, and other companies in the gig economy.

The bill, AB5, was passed by California's senate late Tuesday night. It would make gig economy companies recognize their workers as employees, as opposed to independent contractors. That would bring wage and benefits protections, like guaranteed minimum wage, health insurance, overtime pay, and the ability to unionize.

UPDATE: Sept. 18, 2019, 1:48 p.m. EDT The bill was signed in to law on September 18 by Gov. Newsom

Unsurprisingly, Uber and Lyft are solidly opposed to the bill even as they switch tactics from trying to beat the bill to trying to cut a deal with drivers.

The bill will essentially put into law what the California Supreme Court decided in the spring of 2018 in the Dynamex Operations West, Inc. v. Superior Courtcase.

In their ruling, the court made it harder for companies to classify their workers as independent contractors. And unless workers passed the "ABC test," already in place in Connecticut, New Jersey, and Massachusetts, they should be considered employees.

Using the ABC Test, a person is considered an employee unless the company can show they meet three factors: 1) the person is free from control and direction of their work; 2) the work falls outside the "usual course of business" for the company; and 3) the worker is engaged in an independently established business.

If you're a driver for a ride-share company, you're certainly performing work within the "usual course of the business," which is why it'll certainly shake things up for Uber and Lyft, particularly in terms of their bottom line.

As the New York Timesnotes, industry experts say these companies could see "costs rise 20 to 30 percent" as a result of the bill. Just hours before the bill passed, Uber laid off over 400 people, which followed a similar round of layoffs in July as the company looked to drastically cut costs.

After the Dynamexcourt ruling, those companies had lobbied lawmakers to include them in exemptions, but failed.

As for AB 5, some workers, like "insurance brokers and some who work in real estate professions, marketing and the arts," willbe exempt from the new law, according to the Los Angeles Times.

The San Francisco Chroniclereports that Uber and Lyft are circulating their own bill in an attempt to be exempt from AB 5. They would guarantee an income floor, some health benefits, and "a mechanism for driver feedback" in exchange for keeping drivers as independent contractors.

AB 5 still has to pass California's State Assembly again due to new amendments, and then Gov. Gavin Newsom has to sign it, but that is a foregone conclusion at this point.

The bill would go into effect on Jan. 1, 2020. The bill also has the support of a large number of Democratic presidential candidates.

That said, the debate over AB5 will almost certainly continue into 2020 despite the bill's likely passage, with the companies continuing to fight the law and, possibly, even bring the issue to the ballot for California's voters to decide.

A spokesperson for Lyft told Mashable in an emailed statement:

“Today, our state’s political leadership missed an important opportunity to support the overwhelming majority of rideshare drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits. The fact that there were more than 50 industries carved out of AB5 is very telling. 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.”

Doordash issued their own statement that hints at the aforementioned bill that the companies are furiously trying to get passed for AB 5 exemption.

We're disappointed that California lawmakers missed a major opportunity to create a groundbreaking approach that pairs the flexibility Dashers tell us they value most with the economic security they deserve. DoorDash is committed to passing a new law – in the legislature or at the ballot – that would create benefits and protections for Dashers, including a guaranteed minimum wage with the opportunity to earn more, access to benefits, and protections against discrimination and sexual harassment. We will continue working until we achieve this solution for the hundreds of thousands of Californians who turn to DoorDash to earn supplemental income and the tens of thousands of restaurants and small businesses throughout the state who are able to grow their businesses through our platform.

We also reached out to Uber for comment.