Thoughts on California AB5 (The Lyft/Uber Law)

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).

I’ve questions.

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.


12 thoughts on “Thoughts on California AB5 (The Lyft/Uber Law)

  1. Tyler

    Here’s coming from someone working for a few of these driving gig companies including Lyft and Uber. The problem comes to be that any place that isn’t massively populated with A LOT of demand, rides are not consistent and both platforms LOVE to accept as many drivers as they please, leaving an oversaturation of drivers. What that means for us is now it’s not only inconsistent, but that we’re endlessly chasing rides all over town and being convenient for them because we’re online without getting pay. This is the reason most drivers drive for more than one; most be may be easier to sustain the job with than the other or you really need the combination to be getting enough rides to make any money. So here we are, at their disposal, usually coming to what amounts to barely minimum wage, BUT that’s before you count the wear and tear of your car, gas, cleaning costs etc. and on top of that, no benefits and you pay extra for insurance. Those are a lot more expensive than regular working expenses and you can’t charge your customers more to help you pay for those sort of things. The reason their pay model is jacked, in my opinion, is because they don’t evenly distribute the money being made. They’ll take a good 40% or so from every single ride you make, then that goes into their expenses that they choose to participate in for the most part (investments like automated self driving cars, putting up hubs plus dedicated pop-ups during high volume events with fancy decorations and equipment, paying “bonuses” during peak times or high demand areas) with the “bonuses” (which feel more like earning back some of the money we took from all your rides) really varying from person to person and paying some more than others for the exact same amount of work at the same exact times in the same areas. Honestly if they did away with the bonuses (again, they want us to be a private contractor, right?) then it would come down to paying for their service of connecting to passengers ONLY, no bonuses or miscellaneous costs and be a lot harder to justify how much they take from all our rides, dropping that to a lower percentage of your rides and suddenly making a lot more reasonable wage without feeling at the companies’ mercy. Of course, that wouldn’t solve everything, but I believe that change would be most beneficial and make the relationship less employer to employee but service to contractor. The second issue is that oversaturation. If you can’t pay for that many drivers to be out (in my area it’s literally hundreds of available drives, one or more drivers at each intersection in a grid system, getting paying work only half the time you are out actually devoting all your time to these services, or less) then accept less drivers or only allow a certain amount of drivers out depending on the demand. It doesn’t seem like it’s that hard to connect the dots as a driver that we’re being screwed over and need something to supplement our job, even if it’s just to work for one service at least it is consistent and you’re getting fairly paid for the work you do and getting benefits. Just an addition the reason I do this work is because it is more flexible with my schedule, which is largely due to my disability and not knowing if I’m able to work at what times, but ultimately the demand was falling so short of a livable income that I had to get another job to be able to pay my living expenses at least.

  2. Efrain

    I think the point of all is that doesn’t matter if we are independent contractors, to me what intrigues me is that “why did the companies have to low the wages?” When I started to work they used to give me 34.00 dls to the airport and now it goes from 15.00 to 17.00. In 2012 it was 100.00 to the airport from San Francisco, and so on, for instance the sfo Stockton used to pay above 170.00 and now is almost the half, just the other day I went to Sacramento from Berkeley 69 miles at 63.00 dollars,
    Then I don’t think is fair because when you do those trips you go back to the city empty, no passengers, so is not fair.
    I think they just should pay a reasonable fare for us to pay our tax, our gas, or doctor insurances, social security, medical, vacation, rent and other expenses for the car, etc
    I think a job should be well paid for a person to enjoy a home, and normal living conditions and to avoid over working 10:00, 12.00, and 14.00 hours a day, now if they pay fairly well I’ll be gladly working 12 to 14 hours, well happy and motivated, but consider this; rent is extremely, ridiculously expensive, abusive. Is it about oppression? One thing for sure America wasn’t like this before, when I came to America 39 years ago, people use to be generous, our bosses helped us to get better in our job with incentives to make it better in life, a lot of people came to this country but they didn’t assimilate the traditional ways of America, a lot of them, the new generations are selfish, avaricious, envious, and are destroying the whole tradition,
    Capitalism isn’t bad, but what is bad is the cronyism, and selfishness, this is not America any more, just look at the government it is more a fight between democrats-republicans, rather than constructive situations, I think we are going down, just look at the streets all day and night drugs and mental illnesses, what a mess, in the news nothing but the absurd of fighting, who knows what is the really truth about all this but for sure something is going wrong mostly on every aspect of or every day’s America.
    It is this for what the fathers of the nation fought for?
    This was supposed to be the nation that could bring freedom to the humanity and fight for liberty and human rights. It seems is going just to get worst….

    1. Don Jones

      Well, you make a ton of good points. But imagine you’re a subcontractor in, say, home building. If your normal rate as a plumber was $20/hour (I’ve no idea, that’s just a number), and a general contractor offered you $500 to complete a 20-hour job, wouldn’t you just say “no?” If drivers aren’t being paid enough, why in the world are they doing it in a time of record-low unemployment? I know there are reasons, and I know that I don’t know them. But I’m curious why someone would remain in a relationship that underpaid. If all the drivers are being underpaid, and they all quit, don’t the TNCs go out of business?

      If you’re not being paid fairly, why are you still doing it? I ask as an honest question. I would never accept a job that didn’t pay what I needed, and if a job gave me a cut I couldn’t understand or handle, I would have to look elsewhere. That’s what the market economy means. So long as drivers continue putting up with low fees, the TNCs will – as any company would – continue seeing how low they could go.

      I also think you’ve got some rose-colored glasses, and I don’t mean that to be unkind. We’ve always had partisan gridlock in this country, cronyism has been a major thing (less now, actually, than in years past), we’ve always had crime, and so on. The things you’re mentioning are real, but they have always been real. We’ve just only recently had the Internet and cable news to make us all aware of it. But once aware, diligent citizens can take action to address it.

  3. chawktawk

    Your plumber is going to hand you a bill. Your driver is going to take your gratuity along with your **** equal to the company’s pay.

    1. Don Jones

      As a rider, I view myself as paying Uber/Lyft for a service. They do indeed hand me a bill, virtually speaking. I view drivers as a subcontractor, whom the TNC is using to deliver the service I paid for. Given that the drivers choose their own work times, can work for competitors, provide their own tools (cars), and so on, I would – perhaps naively – consider them to be subcontractors. If they were employees, I’d expect fixed work schedules, no working for the competition, and company-provided vehicles. Again, perhaps naive, but that’s how I’m accustomed to seeing it based on my business experience.

  4. Mt

    Uber and lyft connect the rider and the drive and leave it to them to decide how much the cost of the ride is going to be, then they take a commission based on what the driver has made. That is when we will be independent contractors.

    1. Don Jones

      I’m not sure it’s fair to ask Uber and Lyft to change their business models, but as they’ve demonstrated, it’s definitely valid to create a new platform that does what you subscribe. That’s how entrepreneurs work.

  5. Mt

    So as an independent contractor with whom I’m I contracting—uber and lyft or the rider??
    If it is with the rider we should negotiate the price independently. Why are we negotiating with the connection platform provider?

    1. Don Jones

      Well, I mean, from a legal perspective, you’re contracting with the TNC because that’s who pays you. It’s the flow of money. I don’t deny that there’s probably a model where an Uber-like company exists, and lets drivers state their rates, and then matches riders based on price, reputation, and whatever other criteria, with the TNC keeping some fixed fee or percentage for “making the match.” But nobody’s started that platform. Perhaps that’s a new business model for someone. Maybe some enterprising driver should disrupt Lyft/Uber instead of wanting to be an employee? Is that valid?

  6. Theresa

    If you are truly a independent contractor, you also get to name your price. You negotiate. That is not the case here. Botton line. If you are a true independent contractor, you name your price.

    1. Don Jones

      I’d agree that setting your own price is ONE factor if being an independent contractor. I’d argue that there are many more, and that no one, single factor is the “bottom line.” When you’re a -sub-contractor, I’d expect you to negotiate a price with the general contractor, not necessarily the end customer. Which, clearly, Uber and Lyft also do not do.

      But I’m endlessly curious on this topic, as I’m not an Uber/Lyft driver. For example, I presume that every current driver signed up with a full understanding of the current model – they accept the pricing the TNC sets, they use their own car, they can work for multiple TNCs, they set their own hours, etc. I’m just wondering what changed? I do realize that the TNCs have been lowering rates – was that the straw that broke the camel’s back? Or has something else changed in the arrangement since these drivers originally signed up in what I presume was a happy relationship?

      1. Theresa

        Yes, completely agree. There are so many factors to consider. I am a full time driver. Transparency is another issue. I have questioned uber on many occasions about having the same trip and price fluctuating. Same pick up location, same destination. Difference of about 10 dallars.

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