California Approves Bill That Will Turn Gig Workers Into Employees

California lawmakers have passed a bill that would provide new wage and benefit protections to workers at so-called gig economy companies like Uber and Lyft. Such app-based businesses, worth tens of billions of dollars, have vowed to fight the measure.

The 29-11 vote late Tuesday sends the bill back to the state Assembly for final approval over strident Republican opposition. Democratic Gov. Gavin Newsom has said he supports it. About 400,000 Californians who work for app-based companies could be impacted by the measure, according to the Los Angeles Times. 

Assembly Bill 5, also called AB5, has drawn staunch opposition from on-demand delivery and ridesharing companies while winning support from many of the Democratic presidential contenders. Gig economy work has been blamed by some economists and labor activists for increasingly precarious work conditions for on-demand workers, who lack protections received by full-time workers such as paid sick time, unemployment and disability insurance and retirement benefits. 

At the same time, gig-economy work has proved lucrative for employers, who can save as much as 20% of their costs by shifting to contract workers, as noted by a 2016 UCLA paper.

The California Labor Union said the bill's passage sets "the standard for the rest of the country to follow."

"The misclassification of workers creates a corrosive effect that ripples through our entire economy, undermining our laws to protect and support working people," California Labor Union chief officer Art Pulaski wrote in a Wednesday blog post. "AB 5 is a powerful counter to the corporate greed and rampant exploitation that's driving inequality across our state in emerging and traditional industries, alike. 

AB5 puts into law a California Supreme Court decision making it harder for companies to classify workers as independent contractors. The bill would make those companies classify their workers as employees instead.

Last month, Uber and other app-based businesses that rely on gig workers said they would spend $90 million on a ballot initiative that would exempt them from AB5, if it becomes law.

While the bill's impact on gig economy companies has drawn most of the attention, it would affect a wide array of industries.

Uber, Lyft and other ride-sharing drivers went on strike before Uber's IPO in May, demanding, among other things, a more equitable pay structure. The labor action came after Uber shifted its pay structure to shift from compensation based on a percentage of the fare to paying on a per-minute and per-mile formula. Uber had also cut compensation for drivers in Los Angeles from 80 cents a mile to 60 cents.