California passes bill that classifies gig economy workers as employees(nytimes.com)
nytimes.com
California passes bill that classifies gig economy workers as employees
https://www.nytimes.com/2019/09/11/technology/california-passes-landmark-bill-to-remake-gig-economy.html
721 comments
Is there any reason to believe the ride sharing companies won't reorganize their drivers using a similar model to what Amazon uses for their delivery drivers: contract to external firms that employ drivers so the parent entity is absolved of responsibility?
https://www.nytimes.com/2019/09/05/us/amazon-delivery-driver...
https://www.nytimes.com/2019/09/05/us/amazon-delivery-driver...
This is an extremely heavy handed law which would be destructive to large parts of the economy by making many people’s livelihoods illegal.
The drafters of the law knew this, which is why 90% of the text of the law is carve-outs for various professions. But forcing people to live their lives through loopholes never works well.
For example, they have this carve out for high skilled professions:
> (3) An individual who holds an active license from the State of California and is practicing one of the following recognized professions: lawyer, architect, engineer, private investigator, or accountant.
Sorry, software engineers. An accountant or an architect might be allowed to take on lucrative contracts, but since the state of California doesn’t have a special piece of paper for your job, they’re not going to allow you to work in the way you choose.
Edit: I myself am a software developer who has enjoyed working contracts in the past and would like the option to do so again.
The drafters of the law knew this, which is why 90% of the text of the law is carve-outs for various professions. But forcing people to live their lives through loopholes never works well.
For example, they have this carve out for high skilled professions:
> (3) An individual who holds an active license from the State of California and is practicing one of the following recognized professions: lawyer, architect, engineer, private investigator, or accountant.
Sorry, software engineers. An accountant or an architect might be allowed to take on lucrative contracts, but since the state of California doesn’t have a special piece of paper for your job, they’re not going to allow you to work in the way you choose.
Edit: I myself am a software developer who has enjoyed working contracts in the past and would like the option to do so again.
For those of you who want to read the bill: https://leginfo.legislature.ca.gov/faces/billCompareClient.x....
The pertinent part of the bill:
2750.3. (a) (1) For purposes of the provisions of this code and the Unemployment Insurance Code, and for the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Of course, there's a bunch of exceptions for various professions toward the end.
The pertinent part of the bill:
2750.3. (a) (1) For purposes of the provisions of this code and the Unemployment Insurance Code, and for the wage orders of the Industrial Welfare Commission, a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
(B) The person performs work that is outside the usual course of the hiring entity’s business.
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Of course, there's a bunch of exceptions for various professions toward the end.
If this actually gets enforced, I predict we'll all be talking about the law of unintended consequences in a year's time.
It seems pretty clear that the Governor is going to sign the bill, so this is going to be a pretty big deal.
The law wouldn't take effect until the beginning of next year, and in that time Uber, Lyft, and Doordash will have collectively spent $90 million on a ballot prop campaign to exempt them from the law.
Not looking forward to all the ads, but I will be curious where the money comes from on the other side.
The law wouldn't take effect until the beginning of next year, and in that time Uber, Lyft, and Doordash will have collectively spent $90 million on a ballot prop campaign to exempt them from the law.
Not looking forward to all the ads, but I will be curious where the money comes from on the other side.
This seems like terrible legislation. Yes, part time gig workers are exposed to harms that employees don’t face (i.e. lack of health insurance). But the ability to work flexibly and between lots of companies has huge upside for them and for firms. Why not tax companies who use these workers and put the tax revenue toward a special health insurance / social safety net specifically for gig workers? Mitigates many of the downsides and preserves flexibility.
So what's actually going to happen? I'm still confused.
Ridesharing drivers will now be paid wages, not based on the time that they have a passenger? Will the ridesharing service have to pay for the cars and their maintenance?
From the article, it seem the only effect is that drivers are going to be scheduled in advance, and flexibility is going to be decreased.
Ridesharing drivers will now be paid wages, not based on the time that they have a passenger? Will the ridesharing service have to pay for the cars and their maintenance?
From the article, it seem the only effect is that drivers are going to be scheduled in advance, and flexibility is going to be decreased.
It seems to me that an evolution of the current Uber/Lyft model would allow for the gig-economy to continue. Today Uber/Lyft being the exclusive determinants of both cost of rides and pay for drivers, which leads to 'prividing rides' being their core business.
If NewCo were to build an app/platform that allowed drivers to bid on rides in real time (perhaps with driver determined presets for price floors, distance, etc), while skimming a percentage off for NewCo, then drivers would clearly be NewCo's customers and not employees.
Under this model, NewCo could also sell insurance to their customers (the drivers), lease them vehicles, etc. all without 'directing' them, or running any risk of them being classed as employees.
Perhaps this will be an unintended consequence to this legislation, but the ultimate outcome of this would likely be worse for many drivers, as open & competitive bidding for rides would likely drive down prices. Look at eBay and Amazon - lowest seller sells most.
If NewCo were to build an app/platform that allowed drivers to bid on rides in real time (perhaps with driver determined presets for price floors, distance, etc), while skimming a percentage off for NewCo, then drivers would clearly be NewCo's customers and not employees.
Under this model, NewCo could also sell insurance to their customers (the drivers), lease them vehicles, etc. all without 'directing' them, or running any risk of them being classed as employees.
Perhaps this will be an unintended consequence to this legislation, but the ultimate outcome of this would likely be worse for many drivers, as open & competitive bidding for rides would likely drive down prices. Look at eBay and Amazon - lowest seller sells most.
This is an Atlas Shrugged moment, if I’ve ever seen one. I know Uber and Lyft would not do it because they are public companies and other reasons. Yet, it is my opinion, that they should. They should fire everyone in CA.
Why?
Because this is preposterous.
These companies started with the premise that people could sign-up to monetize free time by driving others using their vehicles. That was the deal, the contract, if you will.
Nobody forced drivers or passengers to participate in any way.
The system was the very embodiment of freedom: You do as you want, when you want, if you want to. And you can also stop and not do it if it does not deliver value. This applied both to driver and passenger.
This move represents the use of force on the part of government to unjustly interfere with the free market. It’s the continuation of a slippery slope in CA that will eventually cause this State’s politics to become indistinguishable from that of a third world country.
This is also wrong because, as far as I know, it is the first time government uses force (because that’s what laws are) to materially change the business model of public companies.
Uber and Lyft should fire everyone in CA immediately. That’s the only power they have. If they don’t move to force a repeal these politicians are going to mess with them until the end of time. If you have ever had the “pleasure” of dealing with the State Board of Equalization you know precisely what I mean. It’s hard to believe, but, yes, they are worse than the DMV.
This might also mean that, by extension, it will be dicey to hire anyone in CA for gigs. Be it a graphic designer or coder, if the potential exists for trouble people will simply hire out of state out of the country.
As Ross Perot famously said, paraphrasing...that huge sucking sound you hear are jobs leaving CA, if not the country.
For Uber and Lyft it might mean accelerating their transition to robot cars in order to get rid of people as soon as possible.
Why?
Because this is preposterous.
These companies started with the premise that people could sign-up to monetize free time by driving others using their vehicles. That was the deal, the contract, if you will.
Nobody forced drivers or passengers to participate in any way.
The system was the very embodiment of freedom: You do as you want, when you want, if you want to. And you can also stop and not do it if it does not deliver value. This applied both to driver and passenger.
This move represents the use of force on the part of government to unjustly interfere with the free market. It’s the continuation of a slippery slope in CA that will eventually cause this State’s politics to become indistinguishable from that of a third world country.
This is also wrong because, as far as I know, it is the first time government uses force (because that’s what laws are) to materially change the business model of public companies.
Uber and Lyft should fire everyone in CA immediately. That’s the only power they have. If they don’t move to force a repeal these politicians are going to mess with them until the end of time. If you have ever had the “pleasure” of dealing with the State Board of Equalization you know precisely what I mean. It’s hard to believe, but, yes, they are worse than the DMV.
This might also mean that, by extension, it will be dicey to hire anyone in CA for gigs. Be it a graphic designer or coder, if the potential exists for trouble people will simply hire out of state out of the country.
As Ross Perot famously said, paraphrasing...that huge sucking sound you hear are jobs leaving CA, if not the country.
For Uber and Lyft it might mean accelerating their transition to robot cars in order to get rid of people as soon as possible.
Can anybody here with proper experience break down the "ABC" test for me? It seems to me like the "C" part (that the work is "part of a company’s regular business") applies to literally any company who would hire a freelancer to work on their product or service.
"Ride-hailing drivers hailed the bill’s passage." - I wonder how happy they will be when their job simply goes away because of that bill.
It's terribly misguided and anti-freedom.
I think it is a problem if companies like Uber are not honest with their employees, like neglecting to mention that their cars may break down and require maintenance, which should be factored into the income. But that is about honest information sharing, not forced employment.
Nevertheless, people should be free to do contract work and negotiate contracts on their own terms.
It's terribly misguided and anti-freedom.
I think it is a problem if companies like Uber are not honest with their employees, like neglecting to mention that their cars may break down and require maintenance, which should be factored into the income. But that is about honest information sharing, not forced employment.
Nevertheless, people should be free to do contract work and negotiate contracts on their own terms.
Well, RIP to the Gig economy hopefully robots get here soon. Cause I can't see the market surviving this.
Gig economy workers are neither contractors nor employees. They're something in-between. They are neither a square peg nor a round peg. They're a triangle. Forcing a triangular peg through either a round hole or a square hole is wrong.
We need a new, third type of classification.
We need a new, third type of classification.
The Uber layoffs announced yesterday now seem to be strategically timed. If we assume the standard 3 month severance offered by big companies, the layoffs would free up cash at the end of 2019 - right when they’d need it for the increase in CA drivers benefits.
California industry revolutionizes businesses, California government ruins them.
I would like to read more comments from actual drivers from this apps instead of people saying things they think about them and their lives.
“Today, our state’s political leadership missed an important opportunity to support the overwhelming majority of rideshare drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits,”
What is their idea of thoughtful solution?
What is their idea of thoughtful solution?
I read this as Uber/Lyft will no longer operate out of CA. And many other companies that would be required to take on this burden will leave CA as well. I'm don't see how this will benefit the citizens of CA.
We are looking at more wire tapes being built in California. It makes one wonder whether Cali would implode if Silicon Valley had a rapid decline
We are getting to a fundamental dissonance between different models of work engagement, and the cost (monetary and environment) of essential services that citizens need to rely on.
Workers say 'I need to be able to choose when I work, and for how infrequently'.
Government says: 'we will mandate your employee to pay for your benefits'.
Workers say: 'I need to be able to afford essential services, like health care'. Government says: we will either make your employee pay for it, or we will tax the whole country to fund it.
Workers say: I would like to get college education that promises, well paying jobs, and makes myself competitive with, (including, but not limited to) foreign-educated workforce.
Government says: We will make tax the whole country to fund it
Workers say: I would like to sustain family with children, on one salary.
Government says: Nope, but will tax the whole country and fund free child care, for working parents (that's Australia).
--
What's not present in these question/answers -- are solutions that make
a) Work engagement simpler, and less litigious b) The health care cheaper c) The cost of education cheaper
This is
Instead, US is marching along to keep its burden of legalized racketeering through groundless lawsuits.
Instead, the US is keeping its out of control health care costs (or apply price controls, in the hope that quality will not suffer).
Instead, the US is keeping its out of control college education cost....
--
It just seems that we have tilted way from figuring out how to make things cheaper through fair competition and through advances in technology.
Workers say 'I need to be able to choose when I work, and for how infrequently'.
Government says: 'we will mandate your employee to pay for your benefits'.
Workers say: 'I need to be able to afford essential services, like health care'. Government says: we will either make your employee pay for it, or we will tax the whole country to fund it.
Workers say: I would like to get college education that promises, well paying jobs, and makes myself competitive with, (including, but not limited to) foreign-educated workforce.
Government says: We will make tax the whole country to fund it
Workers say: I would like to sustain family with children, on one salary.
Government says: Nope, but will tax the whole country and fund free child care, for working parents (that's Australia).
--
What's not present in these question/answers -- are solutions that make
a) Work engagement simpler, and less litigious b) The health care cheaper c) The cost of education cheaper
This is
Instead, US is marching along to keep its burden of legalized racketeering through groundless lawsuits.
Instead, the US is keeping its out of control health care costs (or apply price controls, in the hope that quality will not suffer).
Instead, the US is keeping its out of control college education cost....
--
It just seems that we have tilted way from figuring out how to make things cheaper through fair competition and through advances in technology.
Can't Uber and Lyft get around this by requiring their contractors to register their own companies? E.g. a SMLLC might be sufficient.
I have spent 6 months building a gig econ app that now is around 5 million valuation. I can assure you it is not easy. If the government doesn't want 1099 workers because technology has made them viable at scale then we need to throw gig econ apps some help with W2 workers. Even changing I9 documentation would be a massive improvement.
From the bill:
(c) The misclassification of workers as independent contractors has been a significant factor in the erosion of the middle class and the rise in income inequality.
These "gig" companies are all unprofitable. Their current business models are consumer-friendly as they try to capture market share, so people mostly love them. But they are not sustainable, the prices will eventually have to go up or become a worse deal in some other way. They are just hoping to use all that cash to stumble into some kind of monopoly or lock-in that eventually removes customer choice. They are not good for society overall, we might get a lot of cheap convenient transportation in the short term but eventually we'll all be worse off as they kill off competition. It's basically price dumping, and the sooner they are stopped the better.
I wonder how this effects companies like Google which contract out most of their workforce.
One unintended outcome of this is probably going to be age discrimination. If companies are now required to provide health care they is an incentive to hire younger workers with cheaper healthcare expenses than older people who cost more.
In broad strokes, I support this because it's helping the driver who used to get great money but then has been getting the squeeze lately.
While it seems like "big corporations complaining", I admit this does threaten certain companies, especially the ones that are not profitable. Charging more per ride or gig doesn't pan out well as ridership and usage drop in step. So far all our Uber rides have been subsidized by Softbank and other investors. Similar story for lots of other gig based apps.
I'm not sure what the real answer is here, but overly simplifying the problem, better pay/benefits for the individual person is better.
Let's hope it pans out to be exactly that.
While it seems like "big corporations complaining", I admit this does threaten certain companies, especially the ones that are not profitable. Charging more per ride or gig doesn't pan out well as ridership and usage drop in step. So far all our Uber rides have been subsidized by Softbank and other investors. Similar story for lots of other gig based apps.
I'm not sure what the real answer is here, but overly simplifying the problem, better pay/benefits for the individual person is better.
Let's hope it pans out to be exactly that.
I'm generally a fan of this bill I think - but I don't like bills with so many carve-outs and special exceptions - usually a sign of bad drafting or special interest influence. And can make things hard to admin. Now you have to parse whether someone is or is not part of a carevout (ie, did they exercise sufficient creativity to be in group A or not).
That's just litigation heaven. Make some rules - any rules really - that can be reasonably followed by non-attorney's. This bills has pages of if's, and's and but's.
That's just litigation heaven. Make some rules - any rules really - that can be reasonably followed by non-attorney's. This bills has pages of if's, and's and but's.
Can someone explain why both the Uber and Lyft stocks are up on this news?
I’m in NYC and honestly can’t figure out how to legally hire a studio assistant for a few hours a week without being at risk for any of a number of lawsuit vectors.
So I just coil my own cables. And I don’t mentor people who want to learn some things about the music industry.
Not a crippling loss for me, but I miss the relationship building, I miss passing on things I’ve learned, I miss the creative back and forth, being turned on to new stuff ... and frankly my studio is a mess.
I’m not sure why we can’t figure out a way to protect workers without making everything a legal minefield. One effect of this sort of legislation is it gets harder and harder to be a small player. The big companies always figure out how to deal with the rules.
It’s sad.