Uber and Lyft have said they plan to back a ballot measure creating a new employment category for their drivers following the passage of Assembly Bill 5, which classifies many contractors as employees. (Kevin N. Hume/S.F. Examiner)

Legislation reclassifying many contract workers as employees signed into law

Gov. Gavin Newsom on Wednesday signed Assembly Bill 5 into law to reclassify workers for ride-hailing services and other companies as employees instead of independent contractors starting in 2020.

Newsom issued a signing message for AB 5, calling it “landmark legislation for workers and our economy.”

He said classifying workers in many sectors as independent contractors rather than employees “erodes basic worker protections like the minimum wage, paid sick days and health insurance benefits.”

Officials with the ride-hailing companies Uber and Lyft have said they plan to back a ballot initiative next year to ask voters to create a new employment category for their drivers. A

fter the state Legislature passed the bill last week to send it to the governor’s desk, Uber chief legal officer Tony West said the company was disappointed it couldn’t reach a compromise with lawmakers and said a majority of their drivers prefer to stay as independent contractors.

AB 5 sought to codify a state Supreme Court decision last year that said in order for workers to be considered independent, they must be free from the direction and control of the hiring entity, perform work that is outside the usual course of the entity’s business, and be customarily engaged in an independent business.

Newsom in his signing message said the next step he plans to take on the issue is “creating pathways for more workers to form a union, collectively bargain to earn more, and have a stronger voice at work — all while preserving flexibility and innovation.”

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