California’s governor on Wednesday signed sweeping labor legislation that aims to give wage and benefit protections to rideshare drivers at companies such as Uber and Lyft and to as many as a million workers across other industries.
The closely watched proposal could have national implications as lawmakers, businesses and unions confront the changing nature of work and the rise of the so-called gig economy.
Backers called it one of the most significant changes in labor law in a generation.
“California is now setting the global standard for worker protections for other states and countries to follow,” Democratic Assemblywoman Lorena Gonzalez said after her bill was signed into law by Democratic Gov. Gavin Newsom.
Uber, however, has suggested it won’t change how it treats its drivers on Jan. 1, when the law is set to go into effect. It has joined Lyft and DoorDash in threatening to spend $90 million on a 2020 ballot measure if it can’t negotiate other rules for its drivers with Newsom and unions.
The legislation makes it harder for companies to classify workers as independent contractors instead of employees, who are entitled to minimum wage and benefits such as workers compensation.
It could also affect janitors, construction workers and home health aides, even though its effect on ridesharing and meal delivery drivers has seized the spotlight.
Those companies treat their workers as independent contractors who are paid on a per-ride basis and don’t have benefits such as health insurance and paid leave.
The companies say the new law could force them to implement work shifts, a move that would eliminate the flexibility that workers enjoy.
Drivers themselves are divided on the issue, with many lobbying in favor of the bill and others expressing concern about losing the ability to choose when they work.
Uber and Lyft have proposed a third option that would set a base hourly wage for workers, set up a collective bargaining process and give them access to a “benefits fund” controlled by the companies that could provide things such as workplace injury protection and paid leave for certain employees.
The California Labor Federation, a sponsor of the legislation, is opposed to such a deal, arguing the companies should have to provide workers the full suite of benefits granted to employees in state law.
“We believe California is missing a real opportunity to lead the nation by improving the quality, security and dignity of independent work,” Uber spokesman Davis White said.
Newsom said in his signing statement that he wants to keep negotiating with labor and business leaders to ensure that gig workers can collectively bargain. That remains a contentious issue because the National Labor Relations Board still considers gig workers to be independent contractors.
“I will convene leaders from the Legislature, the labor movement and the business community to support innovation and a more inclusive economy by stepping in where the federal government has fallen short,” Newsom wrote in a signing statement.
The new law implements a decision made last year by the California Supreme Court regarding workers at the delivery company Dynamex.
The court set a new, three-prong test for companies to use when determining how to classify their workers. To be labeled a contractor, a worker must be free from control of the company; performing work “outside the usual course of the hiring entity’s business;” and engaged in an independently established trade, occupation or business of the same nature as the work they are performing.
Tony West, Uber’s general counsel, said last week that the company believes it’s already following the law and can withstand legal challenges as it continues to treat its workers as independent contractors.
The sweeping legislation exempts a variety of industries from following the stricter test, including doctors and dentists, licensed lawyers and engineers, commercial fisherman, travel agents and more. It also exempts freelance journalists if they contribute 35 articles or less to a single publication within a year.
In addition, it gives newspaper companies a one-year delay to figure out how to apply to the law to newspaper carriers, who work as independent contractors.