Taking on 21st Century Indentured Servitude – Assemblymember Lorena Gonzalez’ AB 5

by on June 26, 2019 · 0 comments

in California, Economy

By Doug Porter / Words&Deeds

Drivers for Uber and Lyft gathered outside Uber’s headquarters in San Francisco Tuesday June 17 to demand that the company drop its opposition to a state bill that would make most drivers employees. Promises of freedom and opportunity have proven to be false for millions of workers in industries beyond ride sharing, and now the day of reckoning is at hand.

Drivers and delivery workers in cities throughout the country have been organizing protests and filing lawsuits against companies using so-called independent contractors to avoid paying minimum wages and benefits.

Legislation (AB 5) introduced by San Diego Assemblywoman Lorena Gonzalez poses the biggest challenge yet to the so-called gig economy. Changing the rules of the game in the Golden State will have an impact on companies and workers nationwide. So this is a Big Deal.

The California State Assembly overwhelmingly passed the bill at the end of May, which seeks to  codify a court decision (Dynamex Operations West, Inc. v. Superior Court of Los Angeles) setting standards for whether workers should be classified as either employees or independent contractors.

The bill is currently working its way through the State Senate and (some version of) it is expected to end up on the Governor’s desk. The state of California stands to benefit from its passage, based on estimates that it loses $7 billion in tax revenue each year from companies misclassifying employees.

Lawmakers have already amended AB 5  to exempt certain classes of workers who stand to lose from being reclassified as employees– skilled professionals such as insurance and real estate agents, lawyers, architects, accountants, dentists, and hairstylists.

Although the Dynamex decision Court embraced a standard presuming all workers are employees instead of contractors, the ruling was limited to issues surrounding minimum wages and overtime pay.

The case didn’t address workers’ compensation benefits. It didn’t clarify which workers are entitled to rest and meal breaks, or who has a right to paid parental leave and other guaranteed benefits.

The decision established the ABC test for determining employee vs independent contractor status.

  • (A)the worker 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 worker performs work that is outside the usual course of the hiring entity’s business; and
  • (C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
  • Each of these requirements need to be met in order for a court to recognize that a worker has been properly classified as an independent contractor.

At the forefront of the fight against AB 5 have been ride sharing companies. After quietly lobbying behind the scenes for an exemption to the bill, they’re begging in public for a compromise.

From City Lab:

  • This week, three titans of ride-hailing—Uber CEO Dara Khosrowshahi, Lyft co-founder Logan Green, and Lyft CEO and president John Zimmer—took a rare break from competing on the roads to collaborate on the page: They penned an op-ed in the San Francisco Chronicle to voice their collective opposition to a new California law that would re-classify their drivers as employees, allowing them the benefits and bargaining rights long withheld from independent contractors.
  • The sweeping gig-worker legislation, Assembly Bill 5, passed the state assembly last month and now awaits a vote by the state senate and the signature of Governor Gavin Newsom. Acknowledging the gravity of the threat such regulation would pose to their businesses (which are already losing billions of dollars every year), the two now-public companies are keen to use this moment to advocate for an alternative.
  • “Many drivers are offering ideas to improve their experience, and companies like ours have a responsibility to come to the table prepared to do our part,” they write. “We have an opportunity to work with legislators and labor groups to find a different solution that preserves drivers’ ability to work independently if they choose to do so while improving the quality and security of their work.”

Classifying drivers as independent contractors instead of employees means ride sharing companies don’t pay certain taxes, benefits, overtime, or minimum wages to tens of thousands of drivers. As self-employed contractors, drivers lack the right to form labor unions or negotiate contracts.

Uber and Lyft want to keep treating drivers as contractors, and in exchange, they promise to set a minimum pay rate for drivers while they’re picking up and dropping off passengers, create a company-backed fund for benefits like paid time off; and establish an association for drivers to advocate for further improvements.

Although nothing in the bill addresses the question of flexible schedules, the industry is claiming they’ll have no choice but to end the practice should it become law. Uber’s latest strategy involves sending messages through the app to get drivers to oppose the bill.

“Tell lawmakers to protect driver flexibility,” read the message sent to drivers over the weekend.

Nah. Let’s tell Uber, et. al., the rent is just too damn high. Chicken scratch wages for long hours with no safety net is not cutting it.

The erosion of the American Dream is largely driven by various schemes having the effect of reducing what people get paid for work. Some are based on neglect, as in the ten years that have passed since the national minimum wage was raised. Others are purposeful, like the erosion of workplace organizing protections.

The development of an information based economy promised a brave new working world, one eagerly embraced by millions of people left behind as the processes of manufacturing, distribution, and retail have been impacted by globalization.

Freed of the traditional workplace and the constraints of a schedule, opportunities for a decent income were supposed to be limited only by the effort and ingenuity of the participants in what’s become known as the ‘gig economy.’

It has turned out to be one big lie, fueled by public relations campaigns, the mythology surrounding the trickle down of IPO wealth, and the desperation of a declining middle class. The basic model of wealth creation in these new data enterprises remains unchanged, even as they are forgiven for initial losses in the name of scalability.

Uber drivers from around the world shut down their apps back in May as the company launched its Initial Public Offering hoping to call attention to their plight.

From Time:

  • Ahead of the IPO and before the strike was announced, Uber said it would offer long-time drivers a “one-time cash driver appreciation” of between $100 and $10,000, depending on how many trips they have completed. The company says it plans to give out a total of about $300 million to 1.1 million qualifying drivers worldwide. (Uber has not said how many people have ever earned money driving for the company, but turnover is extremely high, so 1.1 million likely represents a small fraction of total drivers.)
  • Un-mollified, drivers across the United States as well as in Chile, Scotland, London, France, Kenya, Australia and elsewhere shut off their Uber apps. Some went offline for as little as two hours, others for as many as 24 hours.
  • This kind of driver discontent could threaten Uber’s future. The company admitted in pre-IPO documents that, if it’s unable to continue attracting drivers, the platforms will become less appealing to customers and the company will post worse financial results. A few sentences later, the company said that it is already experiencing driver dissatisfaction, and that as it reduces driver incentives to improve its financial performance, “we expect driver dissatisfaction will generally increase.” (Emphasis mine)

Rideshare drivers may have a limited future, given the probability of autonomous vehicles in the not-so-distant future.

What won’t disappear are companies seeking to exploit the changing nature what it takes to put food on the table at the expense of employees. The concept of having rights and privileges needs to extend beyond the narrow confines of corporate leadership.

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