U.S. gig economy giants told: “Just pay your damn workers”.

California Demoract Assembly woman Lorena Gonzalez.

A bill in California’s Legislature could force gig economy companies such as Uber and Lyft to treat their drivers as employees – instead of independent contractors.

The bill (Assembly Bill 5) could give their drivers proper employment status, but Uber and Lyft have tried to cut a deal that that would allow drivers to remain ‘independent contractors’.

The bill’s sponsor, Democrat Assembly woman Lorena Gonzalez, from San Diego, has said she does not forsee cutting a deal with the ride hailing companies.

Ms. Gonzalez tweeted: “Billionaires who say they can’t pay minimum wages to their workers say they will spend tens of millions to avoid labor laws. Just pay your damn workers!”

A vote on the bill is expected before the legislative session ends in mid-September. That means time is running out for Uber and Lyft to reach an agreement.

The companies said their proposed initiative would preserve drivers’ ability to set their own schedules, while Uber and Lyft would offer a concession on minimum wage standards, health benefits and collective bargaining rights.

But Uber and Lyft, say that changing the legal status of their drivers poses a “fundamental threat to their businesses”, and have pledged to spend $60 million on a ballot initiative that would exempt them from the proposed law.

After their announcement, DoorDash, the food delivery service, said it would contribute an additional $30 million.

Drivers for Uber, Lyft and DoorDash work as ‘independent contractors’, logging in to the companies’ apps and providing rides or delivering food whenever they choose. They have no legally protected minimum wage, guaranteed sick days or traditional health benefits.

Drivers have complained that the companies cut their earnings without explanation and that they have no recourse if they are removed from the apps.

The ‘contractor classification’ deprives workers of workplace rights as wages and working time protections, health and pension benefits, and the right of collective bargaining

Companies including Uber and Lyft have a business model which circumvents employers responsibilities towards their drivers. Not only are drivers deprived of employment rights they also have to cover their own daily expenses such as fuel, maintainence of their vehicles, and insurance.

“It’s no secret that a change to the employment classification of ride-share drivers would pose a risk to our businesses,” says Uber CEO Dara Khosrowshahi, Lyft CEO Logan Green and Lyft President John Zimmer in a recent newspaper article.

They say that ’employee status’ will harm drivers in that it will deprive drivers of flexibility’ to set their own hours, which the companies say is the  attraction of their work. Instead, they say, an employee structure would require them to slot drivers into set shifts.

“Our flexibility has always been under threat,” countered Nicole Moore, a Lyft driver in Los Angeles and an organiser of Rideshare Drivers United. “They can and they do change the flexibility of our work all the time” by changing fares to prompt drivers to drive at certain times and in certain locations. “Now they’re using it to protect themselves from being obligated to pay us a living wage and to follow basic labor rules.”

And there nothing in state or federal law requires drivers to give up their flexibility’ if they’re classified as employees.

“Lyft and Uber today decide whether or not these workers are flexible,” Lorena Gonzalez  told the Senate Labor Committee. “That is in their hands, not in the law.”

“We’re not interested in and haven’t been engaged in anything that would undermine the court decision or AB 5 when it passes,” says Bob Schoonover, president of the state council of the Service Employees International Union.

The debate in California centres on the state Supreme Court’s ‘Dynamex Decision’  named after Dynamex International, a package and document delivery company that in 2004 reclassified all its drivers as independent contractors.

Dynamex didn’t change the drivers’ work responsibilities, but removed them from the jurisdiction of California’s wage and hour rules. Drivers were required to provide their own vehicles and pay for all their own expenses, including fuel, tolls, maintenance,  and insurance, including workers’ compensation insurance. And they no longer received overtime pay.

“Such a conversion would generate economic savings for the company,” the Supreme Court observed. Wage and hour rules should not be lightly discarded, the court said, since “workers’ fundamental need to earn income for their families’ survival may lead them to accept work for substandard wages or working conditions.”

The Dynamex ruling enshrined the “ABC test” into California law as a guide to the difference between employees and independent contractors. The test says workers are employees unless they’re (A) independent of the hiring entity’s control and direction about how they perform their work; (B) engaged in work different from the hiring entity’s business; and (C) conducting an independent business in the same field as the work they’re doing for the hiring entity.

In other words, a plumber hired by a store to fix a leaky bathroom: independent contractor. A driver picking up passengers for Uber: employee. Though they might start and end their workday when they like, Uber and Lyft drivers are subject to numerous corporate rules about their conduct on the job, the condition of their vehicles, the rate at which they accept or reject proffered trips and other issues. Their work is manifestly central to the employers’ business, and the companies themselves acknowledge that many drivers are earning income to supplement other jobs.

The Dynamex ruling left a few loose ends, some of which would be tied up by AB 5. The measure would apply the ABC test to a wide range of workplaces and to unemployment insurance and workers’ compensation coverage, in addition to wage and hour rules alone. It also would carve out a roster of professions from the test, including doctors, real estate salespersons, securities and insurance brokers and hairstylists who rent their booths from salon owners.

What AB 5 can’t do is guarantee drivers the right of collective bargaining. That’s because the National Labor Relations Board, through its general counsel’s office has already ruled that Uber drivers are independent contractors and therefore ineligible to unionise The NLRB memo took an opposite tack from the way the Obama-era board was heading.

“I think the drivers are really employees under the National Labor Relations Act,” argues William B. Gould IV, chairman of the NLRB under President Bill Clinton and an emeritus law professor a Stanford University. “But that door is shut for at least the next two years” because of the general counsel’s decision, which is unreviewable in court.

The driver community web site Ridester says a recent survey showed that that half of all Uber drivers collect less than $10 an hour after expenses. A study done for the New York Taxi and Limousine Commission by Michael Reich of UC Berkeley and James Parrott of the New School in 2017 showed that drivers earned roughly $14 an hour, net of expenses. Lyft says its drivers earn an average of $30.84 an hour from the time they accept until they drop off a passenger, but that’s before expenses.

“We have companies where CEOs are making $45 million a year … and their drivers are sleeping in their cars” Gonzalez said recently. “There is something fundamentally wrong when we have allowed this situation to get to this point.”

Many businesses can no longer compete with the likes of Uber and Lyft. Karen Heisler the co-owner of Mission Pie in San Francisco she struggles to compete with app-based services that use ‘independent contractors’ to deliver food, while she pays the living wage and benefits that keep her employees off taxpayer-funded safety net programmes.

“If you have a business model that intrinsically exploits workers and endows you with a competitive edge endows you with a competitive advantage based on shirking responsibilities and violating law,” she said, “maybe you need to reevaluate that model.”

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