About a year ago, lawmakers in Sacramento enacted Assembly Bill 5 (AB 5), a radical rewrite of California’s labor laws that has proven disastrous for thousands of part-time workers with flexible working hours. The bill has led to an outcry among independent contractors and sharing economy workers who have experienced extensive job losses, reduced work hours, and have seen part-time “side hussle” opportunities dry up. AB5 was a heavy-handed solution in search of a problem, and now it’s created a problem that needs a solution.
AB 5 was billed as a win for workers in California’s gig economy by providing them more labor protections and new benefits. However, evidence continues to mount that the law has and will continue to harm the same people it was designed to help. In realistic terms, the misguided regulations restrain workers’ freedom by applying an antiquated employment status model that fails to take into account innovative developments in the workplace. And the economic consequences of AB 5 could be quite devastating. Uber, for example, predicts a loss of 158,000 jobs and price increases of up to 120 percent in some areas once AB5 is fully implemented. Citing AB 5, Vox Media has already cut hundreds of freelance jobs. In other instances, people who haven’t gotten laid off face new restrictions limiting their hours and pay.
Thankfully, this November voters have the opportunity to support a fix that mitigates some of the economic fallout of this anti-worker law through an important ballot measure. Proposition 22 would retool the more harmful components of AB 5 by relassifing app-based transportation and delivery drivers as independent contractors. In short, it would defang the most controversial and consequential provision of AB5.
While the measure doesn’t protect every California gig worker by overturning AB5, it is a big step in the right direction. Its passage will not only better tailor the law to ensure ride-sharing companies remain competitive in California, but the change will also give certainty back to independent drivers who happily serve their customers.
When Governor Newsom signed AB 5, NTU lamented the bill as a “wrong way to go about trying to help gig economy workers” since it completely ignores why certain workers are classified as either a traditional employee or an independent contractor. An employee operates under the “traditional” model of work, where the worker has their workflow and hours dictated by a manager, and receives benefits and stricter labor law protections. Independent contractors, on the other hand, enter into a “contract” with the business, but have almost total flexibility in how they fulfill that contract. Independent contractors can set their own hours and workflow and receive no direct management beyond what is expected of them from their contract, but are not entitled to the same benefits and labor law protections.
Since this ballot measure directly impacts sharing economy businesses - Uber, Lyft, and DoorDash, among others - it’s worth considering how AB5 impacts these businesses and why drivers should be considered independent contractors. Prior to the passage of AB5, drivers for ridesharing companies like Uber and Lyft were widely considered to be independent contractors. There are clear reasons for them not to be considered employees, as they simply don’t align well with the traditional employee model. So once fully implemented, AB5 would require Uber and Lyft to classify drivers as employees, and those workers may initially have access to benefits such as overtime, sick leave, and unemployment.
But to receive these benefits, they would lose the very flexibility that so many drivers say is the reason that such a gig makes sense for their busy lives.
And to be clear, the vast majority of ridesharing drivers don’t want to be stuck with that label. They enjoy the flexibility to drive for Uber and/or Lyft as a side gig to make extra money when they have a few spare hours. In fact, Lyft reports that 91 percent of its drivers drive less than 20 hours per week, and 96 percent say that the flexibility ridesharing offers is a crucial part of the appeal of the gig.
Plainly, these individuals work when they want to work, whether it’s 30 hours or 3 hours a week - and that’s the ingenious convenience of the gig economy.
All lawmakers should be focused on reducing barriers to employment, wage growth, and small business creation. So if California officials truly want to help independent workers, particularly when the COVID-19 pandemic dissipates, they should restore the flexibility and opportunity workers sought when they entered the gig economy. If they won’t do it, voters can, starting with Proposition 22. Onerous regulations on job creators and workers will only push more people away from California towards worker and business friendly environments found in other states. Should that remain the case, a one-way Lyft trip to Nevada -- or Utah, or Texas -- might be expensive, but could prove far cheaper in the long run than the anti-worker policies enacted in California.