Recently, regulators in California determined gig workers working for Lyft and Uber are to be considered employees going forward.
Drivers who were once considered gig or contract workers while driving for Uber Technologies and Lyft Inc will now be considered employees under a new gig worker law in California. The decision to make the change was led by the California Public Utilities Commission (CPUC), the agency that regulates ride-hailing companies across the state. The move came “six months after a state law took effect that makes it tougher for companies to classify workers as contractors rather than employees.” Under the old rule, companies weren’t required to pay gig workers healthcare, overtime, or workers’ compensation.
When asked about the decision, the CPUC said “it had to enforce state law” and determined that “drivers for transportation network companies (TNCs), the industry term for ride-hailing operators, would be considered employees going forward.” The Commission further stated:
“For now, TNC drivers are presumed to be employees and the Commission must ensure that TNCs comply with those requirements that are applicable to the employees of an entity subject to the Commission’s jurisdiction.”
Companies like Lyft and Uber pushed back against similar decisions and ideas in the past, arguing “their drivers were properly classified as independent contractors.” They added that the “majority of them would not want to be considered employees, cherishing the flexibility of on-demand work.” Uber stated:
“If California regulators force rideshare companies to change their business model it would affect our ability to provide reliable and affordable services, along with threatening access to this essential work Californians depend on.”
The companies aren’t wrong. Many people enjoy the flexibility that gigs like ride-share companies offer. Oftentimes, these gigs allow workers to piece together their own schedules, outside the traditional nine to five work schedule. This is one reason why Uber decided to file a lawsuit back in December to “block the new law, known as AB5, arguing that it punished app-based companies and was unconstitutional.”
Lyft also chimed in and said the recent CPUC decision is flawed and that “forcing drivers to be employees will have horrible economic consequences for California.”
In addition to voicing their opposition to the new law and the CPUC decision, both Uber and Lyft “pointed to a November ballot initiative exempting them from the law, for which they, together with food delivery platform DoorDash, have earmarked $90 million.” Under that proposal, “drivers would receive mileage-based subsidies, healthcare stipends and occupational accident insurance, while maintaining their flexibility as contractors.” However, many labor unions have voiced criticism of the proposal, arguing it will create a “new underclass of workers that lack fundamental protections such as sick pay and unemployment insurance.”