Posted on 09/14/2019 9:13:29 AM PDT by lasereye
This week, the California legislature passed Assembly Bill 5, which defines so-called gig economy workers as employees instead of independent contractors. Though aimed at transportation-network companies (TNCs) Uber and Lyft, the bill, taking effect in 2020, could have wide-ranging effects on California’s economy—and the nation’s. By forcing new-economy companies to adopt rules developed for twentieth-century employees, California is missing an opportunity to create a new class of worker, a hybrid of independent consultants and traditional employees.
AB5 is intended to ensure that TNC drivers receive minimum-wage and overtime protections and that companies pay workers’ compensation and other payroll taxes. Unlike traditional employers, however, TNCs don’t schedule when or where their drivers work, or for how long. Drivers make the choices on schedules, shift lengths, and locations. Little justification exists for paying a driver more after he has been driving for more than eight hours by choice, especially since Uber can’t charge more—to the customer, the ride is no different than any other ride.
Minimum-wage laws are another awkward fit for TNC drivers. Activists suggest that drivers should be “on-the-clock” whenever they’re logged in to the Uber app to accept rides—but again, drivers have the choice to accept or decline requests, so it’s not clear why a driver sitting in a parking lot but declining rides should be paid the same as a driver actively moving customers. The issue is complicated further because many drivers work for Uber and Lyft simultaneously, logged in to both apps and accepting whichever ride comes in first or looks most promising. Should these drivers get paid twice?
The bill assumes that TNC drivers all work full-time. But this is not always, or even mainly, the case. Uber “black” drivers typically work full-time schedules, but as professional livery drivers with high-end cars, they get paid premium rates, so minimum wage is not an issue. Part-time student drivers are common, as are part-time drivers working a second job. Many drivers don’t work fixed hours, but rather set an earnings target for the day, knocking off when they reach it. One woman I spoke with drives for Uber after she finishes her regular nine-to-five job. She works in San Francisco but lives in the East Bay area; instead of spending 90 minutes each afternoon in traffic, she picks up fares for an hour, then heads home after rush hour.
Strict wage and overtime requirements could force TNCs like Uber and Lyft to put restrictions on their drivers, forcibly logging them out to prevent overtime or cutting ties if they don’t accept a certain number of rides per hour or day. These constraints would harm the economic prospects of students and others earning valuable side income. It could also be a net loss to riders: Uber and Lyft have been a boon to travelers in areas not dense or busy enough to support traditional cab service, but if those areas can’t support enough rides, service may be lost.
AB5 reverses the regulatory principle of being narrowly written but broadly applied. Instead, it is broadly written (defining “employee” with language such as “usual course” or “customarily engaged”) and narrowly applied, with varied exemptions in the bill for, among others, doctors, grant writers, fine artists, and commercial fishermen, with additional exemptions from the Unemployment Insurance Code and Industrial Welfare Commission. Many businesses straddle the line between contractors and employees, just as TNCs do. Uber and Lyft get the headlines, but the same issues apply to food-delivery services such as DoorDash and Postmates. Apps today help you find a handyman (TaskRabbit), hire a mover (Lugg), or sign up a freelancer to do almost anything (Fiverr.) Less visible to consumers, B-to-B companies and websites connect a broad range of independent contractors, such as programmers. Interfering with this economic ecosystem could harm many more workers than TNC drivers are helped. If a prospective programmer in Boise misses his big break with a client in Chicago because of how California interprets another programmer’s relationship with an app in Santa Monica, multiple parties suffer.
AB5 could even disrupt traditional small businesses far removed from the tech economy of Uber and Lyft. Workers in many firms—from prosaic nail salons to high end yoga studios—are often independent contractors, for many of the same reasons as TNC drivers. The work is either secondary to another job or part-time by choice for flexibility with family and school. Wrapping these firms up in a bill aimed at multi-billion-dollar startups could crush a lot of small entrepreneurship in California. AB5 currently exempts manicurists, but only until 2022, and exempting certain other workers includes requirements—such as a barber issuing a Form 1099 to a salon—unlikely to be met by poor and immigrant workers.
For all the problems with AB5, it does identify a significant issue. While TNC drivers are not employees, traditionally defined, Uber and Lyft’s claims that their drivers are independent contractors, traditionally defined, miss the mark, too. The drivers don’t negotiate their rates with customers or the TNC; the app sets the price, and the customer’s credit card gets charged by the company, which then pays the driver. What TNCs and many other technology companies have created is essentially a new class of worker, one for whom certain controls (price and wages) remain with the company, while others (hours, the ability to work for a competitor) are retained by the worker.
California is missing a huge opportunity to define this new class of worker and enact appropriate rules. A good start would be exempting drivers from minimum-wage and overtime requirements—as noted, drivers have control over when and where they work, and even how much they make, by choosing to drive during surge-pricing periods—while requiring TNC companies to pay workers’ compensation and unemployment taxes. The AB5 solution, applying laws drafted a century ago for factory workers, is bound to backfire or create unintended consequences, for workers and for the economy.
Phillip Sprincin is a veteran of the United States Marine Corps who lives in the San Francisco Bay Area.
Typical CA state over-reach. Just discussed this with the wife and we both think it kill Uber Lyft business models which will cut jobs.
Years ago, I had a paper route, delivering the San Diego Union-Tribune.
I was an independent contractor, and not an employee of the paper.
I’ve heard that this bill will also affect people such as newspaper delivery people. Yes there are still a lot of people who read an actual printed newspaper and get it delivered. Although nowadays, the paper is delivered by adults driving vans or trucks, not by a neighborhood kid on a bicycle or wagon.
btt
Consulting companies, contract companies are the obvious alternative. Jusr as in IT a TEK can specialize in labor, so a company can specialize in labor for truck drivers.
The labor company would be totally separate from the company(s) that own the trucks, which would be totally separate from the company(s) that do the maintenance which would be totally separate from the logistics companys(s).
Specialization to game the government regs and txes.
How are the oldline Yellow Taxi drivers paid?
A friend that was a school teacher/taxi driver was self-employed, no benefits and no overtime, years back in Illinois.
Huh?
This is the equivalent of a restaurant claiming that it should not be subject to public health codes because food isn't part of their core business.
Standard Industrial Classification (SIC): 4121 (Taxicabs)
North American Industry Classification System (NAICS): 485310 (Taxi Service)
The money quote. CA wants more tax money...
What is the relevance to this of how they classify themselves?
I go on early morning walks while the paper people are delivering in my neighborhood. I never see anybody walking the routes. It is not practical if delivery is to every 4th or 5th house. When the weather is nice enough, carriers actually do use bikes and scooters.
Years ago, I was employed doing accounting work for a major financial institution. But I was not an employee of that institution. I was employed and paid by the temporary employee agency. The temp agency was paid by the financial institution, and the temp agency gave me a paycheck.
The response to this bill may be that Uber and Lyft drivers, and others, will be employed by a 3rd party, and that 3rd party company may then be the business entity which deals with Uber and Lyft Corporate, for pay and benefits.
Don’t forget Independent trucker, Barbers, Hair Salons, ... the list is endless. But we will do whatever is Necessary to make sure as many people as possible DEPEND on Gubmint by DESTROYING THEIR JOBS!!!
A little correction to the article is needed.
“AB5 is intended to”:
1) protect and enrich taxi companies, unions and their members;
2) get more campaign contributions for CA politicians from enriched taxi companies, etc; and,
3) curtail freedom of adults to run their own lives.
Correct, there are many people doing various jobs who are contractors and not “employees” of some company.
I saw a group of Uber drivers on TV, and they were against this law. They said they like the freedom to set their own hours, and that’s part of why they work for Uber. One guy expressed concern that he will now be assigned a specific shift, and also expressed concern that his hours will be limited, so as not to get into time and a half overtime territory.
And they also said they expect they will be paid less, if Uber has to treat them as employees, and have to pay workman’s comp, health insurance, etc for them.
And yet they classified themselves as a "Taxicab" company in the corporate documents they filed when they established the company.
Are they lying now, or did they file fraudulent paperwork when they established the company?
There is already a female Uber driver in San Francrappo that has filed a Lawsuit against Uber as soon as they told the State to go pound sand and they will NOT reclassify drivers as employee’s. She Wants her Workers Comp so she can take 6 months off PAID for her Hangnail and menstrual cramps.
When someone does something successful without the help of the government the left rushes in to destroy it. “You didn’t build that”
Just call them INTERNS instead of independent contractors.
“The labor company would be totally separate from the company(s) that own the trucks, which would be totally separate from the company(s) that do the maintenance which would be totally separate from the logistics companys(s).
Specialization to game the government regs and txes.”
How does that game the government? The workers of each of those specialized companies would have to be classified as employees.
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