So, I’ve been reading up on this AB5 in California (which today passed their legislature, and the Governor has indicated he’ll sign it).
First, I completely understand some of the arguments in favor of the bill, I do. Working 8+ hours a day and not getting benefits, not being eligible for worker’s comp or uninsurance – believe me, I’ve been there and I get it. In my case, it was a choice and I very much was a contractor, so I’m not complaining.
Also, AB5 has a huge number of carved-out professions, like real estate agents, and I’m not sure how that fits the “spirit” of the thing, except that I suppose those professions weren’t upset about their state of things. But, I mean, it’s a huge list of “contractors who really are contractors, even if they can’t pass the is-a-contractor-test.” Barbers. Editors. Writers (thanks). Graphic designers. Travel agents. Repo agents. The list literally goes on and on.
But I question whether this is going to create the outcomes the ride-share drivers are after. And this also feels like a twist on the AirBnB controversy that exists in so many places. AirBnB pitches themselves as “helping homeowners make ends meet by renting out a room now and then,” when in fact the vast majority of their listings are investment properties that are rented full-time; Uber and Lyft pitch themselves as a great way to pick up some extra cash on the side, when in fact more than a few drivers do it full-time.
Anyway, about the outcomes.
At least in Vegas, every driver drives for both Uber and Lyft. If those companies have to treat drivers as employees, you can bet that will stop. An employer can absolutely prevent you from “moonlighting” for the competition, and they will. Those drivers are going to have to choose their poison, and it’ll mean gambling on one or the other. The might be prevented from working for Postmates, for example, if they’re an Uber driver, because Uber wants them available for Uber Eats. I feel like maybe they didn’t think about this.
Right now, drivers decide when they’re on-shift and off-shift, and they can decline rides. As employees, you can bet that’ll stop. Employers get to dictate your work shift to you, and they can even tell you which part of town to go hang around. And you don’t get to decline tasks that fall within your job. I also feel maybe this didn’t get thought through.
Drivers who are employees will certainly be able to unionize (contractors can’t, although they can legally form their own trade groups and have markedly similar effects). This will be good for union payrolls, and it’ll likely result in higher wages to drivers, especially if drivers continue using their own vehicles (like Domino’s Pizza delivery people do). Drivers would get benefits, be covered by worker’s comp and uninsurance, and whatnot. These are, nominally, good things.
It’ll put Lyft and Uber flat out of business. Their models aren’t even sustainable now, let alone if they had to take on that kind of payroll and essentially become taxi companies. It’s a bit like McDonald’s being expected to pay a living wage – they don’t charge enough in most places to do that sustainably, which is why the company is now investing so much in kitchen automation technology. McDonald’s was kind of always the high-school/college kid’s part-time job to learn how to be an employee and make some pocket money. I kind of feel like Uber/Lyft were like that, too. Or meant to be.
AB5 says that you have to meet all of these three conditions in order to be a contractor:
(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.
Yeah, that’s more or less ride-share drivers to a tee. Uber/Lyft will argue in court (and oh, this will go to court) that drivers can clock in and out as they like, hang out in whatever part of town they like, and turn down rides as needed. That’s about as “free from control and direction” as possible. Drivers supply their own cars, drive according to their own rules (yikes), and so on. Uber doesn’t make them all buy Priuses (Priusi?), which would be an indication of “control.”
(B) The person performs work that is outside the usual course of the hiring entity’s business.
This one’s tricky. Uber/Lyft have and will argue that they’re in the business of making connections between drivers and passengers, and that neither company is in fact a transportation company. They’re not wrong, in that no employee of theirs is a driver: they’re all software engineers and marketing people and such. Judges and juries can be swayed, but this really hinges on what you think Uber and Lyft do for a living. You might say you’re going to “call an Uber,” but what you’re really doing is “contacting Uber to put me in touch with a driver, who will then do the driving without input from Uber.” (Uber says they’ll continue making exactly this argument.)
(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.
This one’s also tricky. Driving is an independently established trade, and when a driver can drive for both Uber and Lyft and all their food delivery competitors, it’s really hard to argue that they’re not “independently established.” When you work for five competing companies (and many drivers do, often all at once), you’re kind of, by definition, an independent contractor.
Of course, a bunch of all this is based on the Dynamex decision, basically saying that the Borello test (an 11-part test, with the idea being you may not meet all 11 points but you meet a lot of them) didn’t apply. Dynamex is a courier service (Uber for packages, basically), and they converted their employee drivers to independent contractors, prompting a lawsuit. AB5 more or less codifies the cost decision in Dynamex. In Dynamex, the court relied on a different “test” from the Martinez case, which more or less says, “if you’re doing work for someone, you’re an employee.” That’s in part why AB5 contains an enormous raft of carved-out exception professions, because otherwise literally everyone would be an employee. Like, your last plumber. The court also “translated” some of Martinez’ “terms of art” into plainer-English, which is where the above three-part “ABC” test came from. AB5 simply adopts that decision’s language into law.
But there are arguable differences with Uber/Lyft. From a commentary on Dynamex:
For example, prong B of the ABC test is particularly troublesome for any businesses that use independent contractors to deliver or provide their core product or service. In applying the ABC test to Dynamex, the Court noted that a class of delivery drivers could be certified under prong B because the question of whether the delivery drivers were performing outside the usual course of Dynamex’s business could clearly be resolved on a classwide basis. Indeed, delivery services—which are provided by the delivery drivers—are the very core of Dynamex’s business.
Sure, for a courier service, the core business is delivering packages. Naturally. But Dynamex used to use employees to do that, thus establishing what their “core business” is. Uber/Lyft never had “employee drivers,” and they’re going to argue that they’ve never been in the transportation business. They’re a “transportation network company” (they love the “TNC” acronym) and they run a platform.
Lyft has a strong argument there: in Walt Disney World, you can use Lyft to summon a “Minnie Van,” a Chevy Traverse driven by a Disney employee (or “cast member”). Ergo, Lyft is in the business of connecting affiliated, not-its-employee drivers, with riders. Indeed, both Uber and Lyft did that first, by connecting professional limo drivers with riders, which is what Uber Black and whatever it’s Lyft equivalent still is.
It’ll be interesting to see where AB5 goes. Regrettably, there’s been precious little early analysis on it. Vox did a piece that’s very pro-AB5, and another one that’s basically a history of the labor movement in the US with precious little on AB5 itself. Personally, from a very distant and abstract legal perspective, I find it fascinating and I’m looking forward to seeing what shakes out. I’m not quite sure how it’s okay for a plumber on a job site to be a contractor, but it’s not okay for my ride share driver to be a contractor, but I’m sure the courts will… eventually… answer that for me.
My God, the lawyers are going to really clean up on this one.