POLITICS

California passes landmark bill to treat contract workers as employees in a move that could devastate Uber and Lyft’s business model

California passes landmark bill to treat contract workers as employees in a move that could devastate Uber and Lyft’s business model
  • California lawmakers have approved a landmark bill that would reclassify contractors for companies like Uber and Lyft as employees.
  • Assembly Bill 5 passed in a 29-11 vote in the State Senate and now heads to the State Assembly, where it is expected to pass and then be signed by Gov. Gavin Newsom.
  • The move could affect over 1 million workers in California.
  • Three companies likely to be affected by the move — Uber, Lyft, and DoorDash — are now planning a multimillion-dollar ballot proposal for 2020 in case the bill is signed into law.
  • Visit Business Insider’s homepage for more stories.

California’s State Senate on Tuesday approved a landmark bill that would reclassify contractors for companies like Uber and Lyft as employees.

The Assembly Bill 5 passed in a 29-11 vote, according to The New York Times, and would apply to companies that use apps to manage their goods and services. It now heads to the State Assembly, where it’s expected to pass, and it could land on Gov. Gavin Newsom’s desk to be signed into law before the State Legislature goes into recess on Friday.

Newsom has indicated support for the move and said tech companies and other employers are eroding worker’s basic protections like “minimum wage, paid sick days, and health insurance benefits.”

“Working people have lost their bargaining power,” he wrote in an op-ed piece published on Labor Day in The Sacramento Bee.

“Employers shirk responsibility to safety net programs like workers’ compensation and unemployment insurance. Taxpayers are left to foot the bill.”

The landmark move could affect over 1 million workers in California.

Read more: Uber and Lyft drivers explain why they are striking

According to the Business Insider transportation reporter Graham Rapier, the move could put in place a three-part test that would determine a worker’s status as an employee or independent contractor.

Lorena Gonzalez, the California assemblywoman who proposed the bill in 2018, said on Twitter that the move would “stop the misclassification of nearly a million” California workers so they would be entitled to employment benefits.

The bill’s passing comes after years of debate on how to better manage the so-called gig economy in which people have shifted their employment toward contract work.

Several companies that rely on contract workers, including Uber, Lyft, and the delivery service DoorDash, have pledged $30 million for a ballot initiative that would exempt themselves from the bill should it become law, The New York Times reported last month.

Gonzalez has said she does not predict a successful compromise with the companies.

“Just pay your damn workers!” she wrote on Twitter on Thursday.

Lyft and Uber did not immediately respond to a request for comment from Business Insider.

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