By Eliot Brown
Early this year, the organizers of a small Bay Area theater told
Alicia Dattner they wouldn't be able to pay her for an upcoming
comedy act. The reason: A new California law that reclassified
gig-economy workers, such as Uber drivers, as employees meant it
would be too expensive to hire her.
Ms. Dattner was confused. Why was a law aimed at Uber and Lyft
affecting comedians?
"It makes no sense," said Ms. Dattner, who also teaches comedy
and public speaking workshops.
When California legislators passed the high-profile labor law
last year, they said it would increase protections for drivers for
ride-hailing and delivery companies such as Uber Technologies Inc.,
Lyft Inc. and DoorDash Inc. By classifying these workers as
employees, instead of independent contractors, the law, known as
AB-5, would make these workers eligible for health insurance, paid
time off and other benefits -- if their roles included tasks that
are part of the normal course of a company's business, among other
requirements.
It hasn't worked out that way. The Silicon Valley companies have
defied the lawmakers' intentions, leaving their drivers' status
unchanged while they fight the law in the courts and wage a costly
campaign to hold a statewide popular vote this November on a
measure that would exempt them from the law.
Meanwhile, magicians, freelance journalists and interpreters
have found themselves losing work: Many small businesses say such
measures would be too costly to implement, and have instead opted
to cut back on their use of independent workers.
Besieged with complaints, the California legislature earlier
this month amended the law to exempt workers in industries from
comedy to youth sports. While a huge array of groups with groups
with objections -- including interpreters and journalists--were
mollified, concerns about the law's effects still linger among
employers and workers alike, including small theaters, fast-food
franchises and even some mall Santas.
The ride-sharing and delivery companies' legal and political
push against AB-5 is "such a frustrating example of the way you can
buy your way into a regulatory environment that suits you," said
Veena Dubal, a professor who studies employment law at University
of California, Hastings, and has been a vocal critic of the
companies. "They have been defying the order since Jan. 1.
Meanwhile, a yoga studio doesn't have that luxury."
Uber and Lyft have said they believe their drivers are still
independent contractors under the law, in part because they
describe themselves as digital-app companies that match drivers
with riders, not transportation providers. The law doesn't
specifically mention ride-hailing or food delivery.
If forced to reclassify their drivers as employees, the
companies say their businesses -- already unprofitable -- would be
completely upended. They would need to pay workers hourly wages for
scheduled shifts, dropping the flexibility many drivers enjoy. They
would need to raise fares, decrease service and even stop operating
in some areas, they say. Uber estimated in a court filing that at
least 150,000 of its 210,000 active drivers in California would no
longer be able to work for the company, while fares would go up
between 20% and 120% across the state. They have presented
petitions signed by thousands of drivers opposing the law.
The companies are currently seeking to have California voters
weigh in on the matter using the state's ballot-measure process,
which allows laws to be passed, overturned or amended by popular
vote instead of by the legislature.
A Lyft spokeswoman said: "If the legislature had done its job
and made policy that actually protected drivers, the ballot
initiative wouldn't have been necessary."
Uber, Lyft, DoorDash and others have thus far spent $180 million
to support Proposition 22, as the initiative is known, on the
ballot Nov. 3, making it one of the most expensive ballot measures
in California history. It dwarfs the more than $6 million being
spent by labor groups opposed to the measure, which aims to
classify the ride-hail and delivery companies' drivers as
independent contractors, exempting them from AB-5.
The AB-5 legislation grew out of a California Supreme Court
decision in 2018 that implied a huge swath of professions should be
classifying contract workers as employees, eligible for stronger
labor protections such as workers' compensation.
To clarify the issue, lawmakers in Sacramento decided to push
legislation that would put broad new restrictions on when a company
was able to rely on an independent contractor instead of an
employee. Debate over the bill quickly ballooned into a referendum
on Uber, Lyft and the gig economy overall, with labor groups and
most state lawmakers pushing to reclassify drivers and other
contractors they contended were only nominally independent.
Initially the ride-hailing and food-delivery companies said the
legislation would be disastrous, adding costs and robbing drivers
of their flexibility.
Then, around the time the bill passed a year ago, the companies
adopted a new argument, saying their drivers clearly didn't qualify
as employees under the law at all, in part because their main
products were mobile apps, not transportation services.
Lawsuits followed, and a judge in San Francisco state court
recently ruled against Uber and Lyft, saying companies had engaged
in a "a prolonged and brazen refusal to comply with California
law." Still, the companies don't have to change their operations
until after the ballot measure in November.
Those who say they have lost work because of the law have been
left bitter.
Mario Moncada, a Santa Monica, Calif., physical therapist, had
long worked on a freelance basis, getting jobs through a
home-health agency. He liked the flexibility and built up a
subcontracting business of his own, sending work to other physical
therapists. As a result of the law, his subcontracting business
vanished and he had to become an employee of the agency, following
a more rigid schedule. The shift cost him tens of thousands of
dollars a year, he said.
"I now have to move out of my place of residence," he said as he
was packing up his house to leave for Louisiana.
The follow-up bill that was signed into law last week appears to
offer a fix for physical therapists in similar situations,
according to a trade group.
Lorena Gonzalez, the California assemblywoman who wrote both
AB-5 and the follow-up measure, said she spent a good part of the
year hearing concerns about the law, and tried to exempt groups on
which it was having unintended effects.
Ms. Gonzalez, a San Diego Democrat, said that even with the
recent exemptions, the law would still mean countless workers at
nail salons and janitorial companies will now be treated as
employees eligible for benefits like paid time off. Such workers
have long deserved better protections, she said, while she remains
upset about the ride-hail companies.
"We should all be outraged that they continue to not follow the
law," she said.
Some affected groups aren't pleased.
Franchisees may qualify as employees, meaning a chain like
7-Eleven may need to employ people who lease and operate stores.
Currently such franchisees pay a fee to the chain's owner. Matthew
Haller, a vice president at the International Franchise
Association, said that some brands have halted expansion plans in
California as a result of the law.
Small theater groups -- which often paid musicians, actors and
crew members as independent contractors -- are particularly
frustrated. Gail Gordon, founding director of the one-year-old Numi
Opera in Los Angeles, said after the law passed, she realized how
much higher her costs would be and in February canceled plans for a
performance to be held in May.
"It would have put 30-plus percent on top of my budget -- which
was already well strapped," she said. As it turned out, the
performance of "Violanta," an opera by a 20th-century Austrian
composer, would have been canceled as a result of Covid-19, but she
remains uncertain what the future holds for another she has
scheduled for fall of next year.
"I don't know what's going to happen," she said.
(END) Dow Jones Newswires
September 12, 2020 00:15 ET (04:15 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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