A state Assembly bill seeking to strengthen protections for “gig workers” hired by companies like Uber and Lyft was greenlit by a Senate committee on Wednesday with several modifications.
The common practice of classifying thousands of gig workers as independent contractors rather than employees was cast into doubt by a 2018 state Supreme Court ruling, commonly known as the Dynamex decision. The ruling has not only shaken up the gig economy, but also has implications for a number of industries where workers have typically been classified as contractors, including truckers, hairdressers and dancers in local strip clubs, and questions about its implementation remain.
With a 4-1 vote, Assembly Bill 5 — which would codify a widely used workplace standard known as the “ABC” test to determine workers’ employment status into California Law — was voted out of the Senate Labor, Public Employment and Retirement Committee Wednesday.
The ABC test, as prescribed in the Dynamex decision, dictates that a worker can only be classified as independent contractors if the worker is free from the control of the hiring company while performing their work. Additionally, the work must fall outside of the hiring business’ usual scope of work and the worker must have an independent business or trade beyond the job for which they are hired.
Amendments added to the bill on Wednesday include exempting hair stylists, barbers, estheticians, and electrologists “who maintain their own business license and are free from direction or control of the salon from which they lease their space.”
Exemptions are also granted to hiring businesses that can demonstrate that workers they contract with are able to negotiate their own rates and hours, among other things, as well as to contractors in the construction industry hiring subcontractors.
Following Wednesday’s vote, the bill will head to the Senate Appropriations Committee prior to being voted on the floor. The amendments will require a concurrence vote in the Assembly before Gov. Gavin Newsom can sign off on the bill.
The bill has until Sept. 13 to move through the legislative process, and could die if it fails to gain approval by both houses by that date, according to Samantha Gallegos, a spokesperson for Assemblymember Lorena Gonzalez (D-San Diego), who authored AB 5.
“We want [the gig] economy to exist. But when we talk about labor laws we have to be technology neutral and set expectations — [the rise] of income inequality is largely at the feet of these companies,” said Gonzalez. “We have CEOS making $45 million a year while their drivers are sleeping in their cars. There is something fundamentally wrong when we have compromised or allowed this situation to get to this point.”
Companies that could soon be required to spend millions on providing worker protections like sick leave and healthcare have argued publicly that AB 5 threatens the flexibility of the gig economy.
No matter, hundreds of supporters of the bill, including rideshare drivers and labor unions, trekked to the state capitol in a show of support.
During the hearing, Karen Heisler, the owner of San Francisco Mission Pie, was among those testifying on a need for the bill. Citing increasing rent pressures and its inability to keep up with food delivery services,12-year-old cafe announced last month that it will close this Fall.
“We came up on the unhappy truth that the new sector of online delivery apps has achieved a competitive advantage over us by misclassifying workers. The dollars paid to them are not subject to payroll taxes,” said Heisler. “Some companies argue that if AB5 were to pass, their business model would be threatened. If you have a model based on shirking responsibilities, maybe you need to reevaluate that model.”
Opponents to AB5 included members of the trucking industry, where misclassification has proliferated.
“Thousands of legitimate truck owner-operators don’t have a voice and don’t understand that soon their livelihoods will be taken away,” said Debbie Ferrari, a member of United Contractors, who requested that the bill be amended to include the trucking industry. “It’s unbelievable this is happening in a free society.”
The bill has garnered some support among local leaders. In June, supervisor Rafael Mandelman and Gordon Mar called for a hearing on the working conditions of gig workers.
On Tuesday, Mandelman introduced a resolution in support of AB 5, which is expected to heard by the full board next week. So far, supervisors Sandra Fewer and Ahsha Safai have signed on as co-sponsors.