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California Looks to Give Gig Workers Their Due

AB 5, a bill that would require companies like Uber and Lyft to classify drivers as employees, could provide meaningful labor protections.

Mark Ralston/AFP/Getty

Konstantine Anthony, a 38-year-old Uber driver, usually starts his morning by picking up a commuter in Burbank, California, and heading over the hills on Highway 5 toward downtown Los Angeles. From there, he traverses back and forth across the city, from Beverly Hills to Koreatown, from Inglewood to Los Angeles International Airport. “There’s no way to determine where I’ll end up,” he told me. (Uber does not reveal a driver’s destination until they accept a ride.) Riders have taken him as far north as Ventura County and deep into the desert in San Bernardino County—once even to Las Vegas.

During hard times, Anthony, a single father, has lived out of the car he drives for Uber. “I would drive all day and lean the chair back to sleep at night.” His son went to stay with his mother. When Anthony started driving for Uber in 2015, he earned $26 or $27 an hour. Today—15,000 rides later—his gross pay has fallen to $22 an hour, and that’s before he accounts for the costs of gas, trips to the car wash, oil changes, auto insurance, and the occasional flat tire or busted wiper blade. “Every year my wage has just gone lower and lower,” Anthony said.

In March, Uber admitted to slashing its Los Angeles drivers’ wages from 80 to 60 cents per mile in advance of its initial stock offering. Some drivers have reported earnings as low as $3.75 an hour after expenses. To make matters worse, Anthony and the 900,000 Uber drivers in the United States just like him do not receive health insurance, sick days, paid breaks or vacation time, worker’s compensation, or disability insurance. And the ride-share giant does not guarantee a minimum wage for its drivers. (In 2019, New York City started requiring Uber to guarantee drivers’ pay is at least commensurate with the city’s hourly minimum wage. For the rest of the country, the company pays by time and miles traveled, and the rate varies from city to city.)

Like other gig economy companies, Uber’s profit margins rely on skirting basic federal and state labor protections—such as those denied Anthony—by classifying drivers as independent contractors instead of as employees. This business model has allowed gig-employment apps to rapidly expand over the past decade into multibillion-dollar global enterprises. Meanwhile, the workers whose undercompensated labor helped build those companies are not eligible to form unions.

But a new bill moving through the California legislature this summer could upend this business model. Known as AB 5 (the “AB” is for “Assembly Bill”), the law would create a test for classifying independent contractors, making it more difficult for gig economy giants and other low wage industries—such as domestic work, trucking, and construction—to exploit the contractor loophole.

“It is very difficult to argue that these workers are not employees,” said Ken Jacobs, the chair of the UC Berkeley Labor Center. “This idea has always been a fantasy.”

The law would, arguably, provide the most sweeping labor protections gig economy workers have seen, at a time when Trump’s Department of Labor and National Labor Relations Board, the two most important federal labor agencies, have been chipping away at the rights of gig-economy workers.

AB 5 expands a 2018 California Supreme Court decision known as Dynamex. The unanimous ruling found truck drivers working for Dynamex, a national delivery service, were employees, and not independent contractors. The Dynamex ruling instructed businesses to use a new classification system called an “ABC test” to determine when a worker is an employee. To hire someone as an independent contractor, the company must show that the worker is a) free from the company’s control, b) providing services that aren’t central to the company’s business model, and c) runs an independent business. If the worker doesn’t meet all three of these conditions, they will be classified as an employee. But currently, the guidelines for classifying gig economy workers leaves a lot up for interpretation. Codifying the Dynamex decision into law would help with enforcement.

“The Dynamex decision, which undergirds the AB 5 bill, was one of the most landmark decisions in California for labor in several decades,” said Steve Smith, director of communications at the California Labor Federation, one of the many unions in the state advocating for the legislation. “Millions of people go to work every day without basic rights,” he said. “This bill and the decision itself provides some clarity, and would allow workers to have basic protections that they deserve.” Under these new guidelines, he continued, it’s very hard to argue that Lyft and Uber drivers would not be considered employees.

Of course, these ride-share giants, which are headquartered in California, have been putting up a bitter and expensive campaign against the legislation, arguing it would tear apart their business model and remove the flexibility that makes these jobs so appealing. (More than 2 percent of California residents work for a work-share platform. And, in cities like Los Angeles and San Francisco, that number is higher.) While focusing on the flexibility argument in an opinion column in The San Francisco Chronicle in June, the CEOs of Lyft and Uber wrote in a surprisingly transparent threat to Californians about the potential implications of the bill: “It’s also no secret that a change to employment classification of ride-share drivers would pose a risk to our businesses.”

Labor experts counter that these tech firms, known for innovation, will be able to adapt their business models to provide these basic protections, ones that traditional companies manage to afford. “We already see gig companies who are operating as employers,” said Jacobs. “There are ways to combine flexibility with these benefits.”

But so far, Uber seems to be using their technical knowhow for something else. Ahead of a Senate hearing on the bill on July 9, Uber and Lyft gave around 500 drivers between $25 and $100, plus a free lunch, to rally at the state capitol in Sacramento in opposition to the bill. And last month, Anthony, the ride-share driver, who is also an advocate for AB 5, received in-app notification urging him to sign a petition against the legislation. “Fight for driver flexibility in California,” the notification read. He told me, “[Uber and Lyft] are trying to say that if this law goes through, we’ll lose our flexibility. But that is a lie. They’ve already taken many steps to reduce my flexibility as a driver.” In recent years, Uber and Lyft have lowered wages and bonuses, forcing drivers to work more and more hours. “I really like my job. My dissatisfaction is the pay cut, not how the app works or the customers.”

Under the new guidelines, the extent of a company’s control over its workers will largely determine whether they qualify as employees. In 2017, in the midst of a divorce, Carmel Foster, a 53-year-old immigrant from South Africa, signed up for Handy—a platform that connects consumers to providers of domestic services—to work cleaning homes in San Francisco. The application appealed to her because of its flexible hours during a period of transition. But once she got started, the app controlled her life—and her pocketbook.

“Once I accepted a client, I had no information about them. I wasn’t allowed to have a relationship with them. I couldn’t cancel it in the case of an emergency, and so my ratings would drop. Handy controlled my ability to get a raise,” said Foster. She had to pay for all of her cleaning supplies, her transportation costs around the city, and the data plan for her phone. After being harassed by a client, and then getting into a car accident on her way between houses, and being forced to pay for medical bills out of pocket, Foster left Handy. “I realized I was paying to be on this app.”

Even if AB 5 passes—the bill is expected to arrive on the desk of California Governor Gavin Newsom (who is seen as an ally of both labor unions and big tech) in the fall—labor experts expect companies like Uber, Lyft, and Handy to challenge the legislation in the courts. “The gig-economy companies who are bigger and higher profile will fight it,” said Jacobs, the UC Berkeley labor expert. “We can imagine long-term litigation around this. And it will take the state stepping in through lawsuits*, the Department of Labor standards enforcement, and city enforcement agencies. It’s going to take action.”

Meanwhile, gig companies have poured millions of dollars into lobbying state legislatures to draft laws with the opposite effect. In 2018, Florida, Indiana, Iowa, Kentucky, Tennessee, and Utah passed what are known as “carve-out” bills, which lock gig workers into independent contractor status, exempting companies from protections such as minimum wage and hour laws, and unemployment benefits. In the first quarter of 2019 alone, Uber, Lyft, TaskRabbit, TechNet, and Alticor have spent $1.2 million on lobbying for a federal carve-out bill, according to information provided to TNR by the National Employment Law Project.

The passage of AB 5 would be an important step in heading off some of this legislation, and could potentially reverberate around the country. The Service Employees International Unionwhich, along with the Teamsters, has been a leader in organizing California gig-economy workershopes the bill will serve as a model for other states, according to one SEIU official, providing protections and better wages for app-based employees.

This is critical for many ride-share drivers like Anthony who see working for Uber and Lyft as a necessity, rather than a choice. “I had to drop out of college to take care of my grandpa. Without a degree, my resources were very limited. Once there’s a kid in the picture, you need a job that pays the bills,” Anthony said. “All I’m asking for is that companies listen to drivers and hear what we’re going through. I didn’t make $70 billion in profit last year. They did and they could cut us a little bit of that check.”

*This story has been updated to clarify legal action that could be taken by the state.