By Eliot Brown
Earlier this year, the organizers of a small Bay Area theater told Alicia Dattner they couldn't pay her for an upcoming comedy act. The reason: A new California law reclassifying gig economy workers like Uber drivers as employees meant it would be too expensive to hire.
Frau Dattner was confused. Why did a law against Uber and Lyft affect comedians?
“It doesn't make sense,” said Ms. Dattner, who also teaches comedy and speaking workshops.
When California lawmakers passed the high profile labor law last year, they said it would increase driver protections for hail shipping and delivery companies like Uber Technologies Inc., Lyft Inc., and DoorDash Inc. by making those workers an employee of instead The act, known as AB-5, would give independent contractors the right to health insurance, paid time off, and other benefits – if their duties included, among other things, duties that are part of the normal course of a company's business.
It didn't work out that way. Silicon Valley companies have defied lawmakers 'intentions and left their drivers' status unchanged while battling the law in court and running a costly campaign to hold a nationwide referendum in November on a measure they break the law would except.
Meanwhile, magicians, freelance journalists and interpreters have lost their jobs: many small businesses say that such measures are too costly to implement and have instead chosen to limit the use of independent labor.
California legislature, besieged with complaints, changed law earlier this month to exempt industrial workers from comedy about youth sports. While a large number of groups with objections – including interpreters and journalists – have been appeased, concerns about the impact of the law remain among employers and employees, including small theaters, fast food franchises and even some shopping malls.
The legal and political pressure from ride-sharing and delivery companies against AB-5 is "such a frustrating example of how you can shop your way into a regulatory environment that is right for you," said Veena Dubal, professor of labor law at the University of California. Hastings, and was a vocal critic of the company. "You've been defying orders since January 1st. In the meantime, a yoga studio doesn't have that luxury."
Uber and Lyft have stated that they believe their drivers are still independent contractors under the law, in part because they describe themselves as a digital app company that matches drivers with drivers rather than transportation providers. The law doesn't specifically mention hailing or the delivery of food.
If they were forced to classify their drivers as employees, the companies – already unprofitable – would be turned upside down. They would have to pay workers hourly wages for scheduled shifts, which reduces the flexibility many drivers enjoy. They said they would have to increase tariffs, reduce service and even stop operations in some areas. Uber estimated in a lawsuit that at least 150,000 of its 210,000 active drivers in California could no longer work for the company, while tariffs across the state would rise by between 20% and 120%. You have filed petitions signed by thousands of drivers who opposed the law.
Corporations are currently trying to get California voters to weigh the matter up using the state's voting system, which allows laws to be passed, repealed, or changed by referendum instead of lawmakers.
A Lyft spokeswoman said: "If lawmakers had done their job and made policies that actually protect drivers, the election initiative wouldn't have been necessary."
Uber, Lyft, DoorDash, and others have so far spent $ 180 million in support of Proposition 22, as the initiative is called, for the November 3rd vote, making it one of the most expensive ballots in California history. It dwarfs the more than $ 6 million spent by working groups opposed to the measure aimed at making hail and delivery company drivers independent contractors and exempting them from AB-5.
The AB-5 legislation grew out of a 2018 ruling by the California Supreme Court that a large number of professions should classify contract workers as workers eligible for higher levels of health and safety, such as workers' compensation.
To clear the problem, Sacramento lawmakers decided to enact laws that impose new restrictions on where a company can rely on an independent contractor instead of an employee. The debate over the bill quickly led to a referendum on Uber, Lyft and the gig economy as a whole. Working groups and most state lawmakers pushed for the reclassification of drivers and other contractors they claimed were only nominally independent.
Initially, the hailship and grocery companies said the legislation was disastrous, costly and deprived of flexibility for drivers.
Around the time the bill was passed a year ago, companies were adopting a new argument, saying that their drivers were clearly not qualified as compliant at all, also because their main products were mobile apps, not transportation services.
Lawsuits followed, and a San Francisco state court judge recently ruled against Uber and Lyft. He said companies have "longer and brazenly refused to comply with California law." However, companies will not have to change their business operations until after the November election.
Those who say they lost their jobs because of the law have remained bitter.
Mario Moncada, a physical therapist from Santa Monica, Calif., Was a long-time freelancer and got jobs through a home health agency. He liked the flexibility and built his own subcontracting company that would send work to other physical therapists. As a result of the law, his subcontracting business disappeared and he had to become an employee of the agency on a more stringent schedule. The shift cost him tens of thousands of dollars a year, he said.
"I have to leave my place of residence now," he said as he packed his house to go to Louisiana.
According to a trade group, the follow-up law that went into effect last week appears to offer a solution for physical therapists in similar situations.
Lorena Gonzalez, the California MP who wrote both AB-5 and the follow-up, said she spent much of the year hearing concerns about the law and trying to exempt groups it had unintended effects on.
Ms. Gonzalez, a Democrat from San Diego, said that despite the recent exemptions, the law would still mean that countless nail salons and janitorial workers are now treated as workers entitled to benefits such as paid time off. Such workers have long deserved better protection, she said, while continuing to upset the hail-fighting companies.
"We should all be outraged that they continue to violate the law," she said.
Some affected groups are not pleased.
Franchisees can qualify as employees, which means a chain like 7-Eleven may need to employ people who lease and operate business. Currently, such franchisees pay a fee to the chain owner. Matthew Haller, vice president of the International Franchise Association, said some brands have stopped expansion plans in California due to the law.
Small theater groups that often hired musicians, actors, and crew members as independent contractors are particularly frustrated. Gail Gordon, founding director of Los Angeles annual Numi Opera, said after the bill was passed she realized how much higher its cost would be and in February canceled plans for a May performance.
"It would have been more than 30 percent over my budget – which was already buckled up," she said. As it turns out, the performance of "Violanta", an opera by a 20th century Austrian composer, would have been canceled due to Covid-19, but she is unsure of what the future will be for another one whose fall is planned next year.
"I don't know what's going to happen," she said.