Gig-worker law spawns confusion, defiance
Fear of unintended consequences spreading among firms, groups
After months of bickering over who would be covered by a landmark bill meant to protect workers, California legislators passed legislation Wednesday that could help hundreds of thousands of independent contractors become employees and earn a minimum wage, overtime pay and other benefits.
But even before California’s governor, Gavin Newsom, had signed it into law, the battle over who would be covered flared up again. Uber, one of the main targets of the legislation, declared that the law’s key provisions would not apply to its drivers, setting off a debate that could have wide economic ramifications for businesses and workers alike in California, and potentially well beyond as lawmakers in other states seek to make similar changes.
“California sets off a chain reaction,” said Dan Ives, a managing director of equity research at Wedbush who tracks the ride-hailing industry. “The worry is that the wildfire spreads.”
In California, religious groups said they feared that small churches and synagogues would not be able to afford making pastors and rabbis employees. Winemakers and franchise owners said they were worried they could be ensnared by the law, too. Even some of the contractors for the app-based
businesses that have been at the centre of this debate said the change could hurt them if companies like Uber, Lyft and DoorDash decided to restrict how often they could work or cut them off entirely.
Under the bill, workers are likely to be employees if the company directs their tasks and the work is part of the company’s main business.
California has at least 1 million workers who work as contractors and are likely to be affected by the measure, including nail salon workers, janitors and construction workers. Unlike contractors, employees are covered by minimum-wage and overtime laws. Businesses must also contribute to unemployment insurance and workers’ compensation funds on their employees’ behalf.
For months, lawmakers have jockeyed to exempt a variety of job categories, including doctors, insurance agents and real estate agents.
Carrying out the mandate will most likely be anything but orderly. Companies in dozens of industries must decide whether or not to comply preemptively or risk being sued by workers and state officials. Some workers may find that their job descriptions change, while others may be out of a job altogether if their employers cut back hiring.
Litigation is also likely to follow.
Uber said Wednesday that it was confident that its drivers will retain their independent status when the measure goes into effect on Jan. 1. “Several previous rulings have found that drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces,” said Tony West, Uber’s chief legal officer. He added that the company was “no stranger to legal battles.”
Saunda Kitchen owns a Mr. Rooter plumbing business in Sonoma County that has 30 employees, for whom she pays payroll taxes and provides the various mandated benefits. But Kitchen said she believed that she herself would have to become an employee of Mr. Rooter under the new law, which could cause the parent company to leave the state.
But Steve Smith, a spokesperson for the state labour federation, said he did not believe the vineyards or Kitchen would be hurt by the law. “We’ve seen no cases of legitimate franchisees being targeted or having any issues at all with the test” in other contexts, he said.