Many Californians are concerned about what AB5 might mean for their livelihood. The assembly bill codified into law the ABC test, which is intended to help employers properly classify workers as either employees or independent contractors. Under AB5, rideshare drivers and other gig workers would need to be classified as employees, legally. That classification change would require rideshare giants like Uber and Lyft to hire thousands of drivers statewide as full or part-time employees, and take on the expenses inherent in that including employment tax and benefits.
On August 10, the companies were given until August 20 to comply with the bill, or risk large financial penalties. In response, Uber and Lyft threatened to leave the California market. On August 20, a last-minute stay was granted for both companies to continue doing business in California as the case works through the system.
It’s likely the companies are hoping that they won’t have to leave at all, thanks to a measure that would rescind AB5 that’s on the November ballot. Prop 22 is a ballot measure that seeks to keep rideshare drivers, delivery drivers, and other gig workers classified as independent contractors. In essence it undoes AB5.
While AB5 is a great step towards progress that will help make worker pay more equitable across industries, and Prop 22 helps offer some protections, I think there’s a better solution yet to be found. Legislation for employee vs contractor law was created more than 100 years ago. It simply isn’t accommodating to the solopreneur phenomena that has been growing increasingly popular in the US, with no end in sight. We’re trying to build on these old laws instead of rethinking our classifications foundationally. It’s time to open the conversation to alternatives, for a variety of reasons I’ve explored below.
AB5 Doesn’t Afford Enough Time for Companies to Make Sweeping Changes
Hiring hundreds of thousands of employees overnight is impossible, and rideshare companies have already made it clear they can’t shoulder the cost in the time allotted. Any major structural shift in business policy like this is going to take a company of their size some time to accomplish. Rather than rush to comply, Uber and Lyft have both made noises about leaving the California market entirely. Given that this is exactly what they did in Austin, it’s a safe bet they’re not bluffing about that, even if California is Uber’s largest market worldwide.
These companies have massive employee numbers and a very high driver churn rate. New drivers are signing up for the service every day. Organizing and extending benefits to all the gig workers would take considerable time and effort, and a great deal of money. That’s why more time is needed to achieve this ideal situation.
Rules and regulations relating to contract work were created decades ago, and these old laws and legislation have not adapted to today’s technological advancements. AB5 and Prop 22 attempt to address some of these issues, but we should be talking about other options that will fully allow businesses to keep up with adapting technology and the opportunities gig work provides.
Voting Out Rideshare Could Impact a Needed Resource Mid-pandemic
COVID-19 has impacted every business, and rideshare is no exception. Many drivers lost their main source of income as requested ride numbers dropped, while others signed up for food delivery and other gig work after being laid off from full-time employment. Additionally, essential workers and others without their own cars often rely on Uber and Lyft to get where they need to go. There are partnerships in place with transportation network companies to help provide this support.
If Prop 22 passes, Uber and Lyft may leave the market. Removing a service many consider essential during a pandemic is not a wise move, in my opinion. The ripple effects for this could be larger than predicted, as essential workers may not be able to get to work. Some workers need to avoid public transit, and thus would either be forced to risk their health or their job without a way to get to work.
Additionally, taking away income streams from the gig workers who count on them will result in higher unemployment. This income stream is a necessity for many, particularly as other job opportunities may have vanished during COVID. Taking this income stream away at this time seems ill-advised at best. Also, there should be space and opportunity for those who prefer the flexibility of gig work to continue doing that work, which is why I’m hoping to start a conversation about what the best solution can be.
Starting the Conversation
I do feel like AB5 is an important progressive piece of legislation, and we need legislation like this in order to enact change. However, the scope of the changes AB5 necessitates isn’t exhaustive, and does not capture technology and marketplace advancements made in the last decade, much less the decade to come. A compromise that perhaps allowed drivers to choose whether they were full-time or contractors might allow for the flexibility that workers love about the gig economy. We need to think about the solo-preneurs and what is best for them. I wish I had the answer, but I am hopeful that with input from other industry veterans, gig workers, and creative thinkers, we can come up with a solution that works for everyone.
Uber CEO Dara Khosrowshahi supports Prop 22, which would allow Uber and Lyft to continue operating as usual. and has proposed an alternative where Uber provides drivers with benefits, without classifying them as full-time employees. Recent polls released by Uber and Lyft seem to show that drivers like this idea, as 82 percent of Lyft drivers and 89 percent of Uber drivers shared that they liked the gig work arrangement with the rideshare giants and did not want to be employees.
Some drivers are pursuing other creative endeavors – particularly in California – that preclude them from working regular hours. They may not want to sign on as employees and thus be assigned regular driving shifts and limited by other regulations. However, there are also drivers that would thrive and take their role as transportation providers even more seriously if they were made employees. They would be able to participate in company culture, raise concerns, and have a steady schedule and benefits.
I think what’s needed right now is a compromise, so we can take our first steps toward equitable payment and benefits for drivers without harming those dependent on the current system. This will allow drivers to keep the autonomy and entrepreneurial spirit they currently enjoy, but also provide them benefits and a safety net if they need it. I think we need to think harder, and start a conversation about an as-yet unknown solution to guarantee a bright future for gig workers.