California law on ride sharing service may hurt ‘gig economy’

Agence France-Presse . Washington | Published: 14:13, Sep 12,2019


The logo of Colombian on-demand delivery company Rappi and the logo of Uber Eats are seen on delivery bags in Mexico City, Mexico, on August 30, 2019. —Reuters file photo

Labour activists on Wednesday were celebrating California’s move to have drivers treated as employees by rideshare firms even as it fuelled concerns it will hurt digital platforms depending on the so-called ‘gig economy.’

A landmark bill was approved 29-11 on late Tuesday in the state senate, with the assembly — which has already approved the measure — expected to send it to California governor Gavin Newsom.

The legislation, which is being closely watched in other states, responds to critics who argue that companies like Uber and Lyft shortchange drivers by denying them employee benefits.

The law, if enacted, challenges the business model of the ridesharing platforms and others which depend on workers taking on ‘gigs’ as independent contractors.

‘This is a huge win for workers across the nation!’ tweeted the California Labour Federation, which endorsed the bill known as AB 5.

‘It’s time to rebuild the middle class and ensure ALL workers have the basic protections they deserve.’

Newsom said however he was in talks with Lyft and Uber on a possible compromise, according to the Wall Street Journal.

The governor planned to ‘stay at the bargaining table, to continue to negotiate,’ the report said.

Uber has no plans to immediately reclassify drivers as employees in January, when the law takes effect.

The law ‘does not provide drivers benefits; give them the right to organise, or classify them as employees,’ Uber chief legal officer Tony West said on a call with reporters.

Uber will press for a new classification that considers workers independent while guaranteeing benefits, and has allocated millions of dollars to get a referendum on the ballot to support an option that would let drivers remain independent while providing safety nets.

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