Gig Companies Take Aim at California's AB-5

November 01, 2019

Large gig economy companies unveiled a major $90 million ballot initiative targeting California's Assembly Bill 5, a law going into effect in January that greatly narrows the scope of independent contractor status for employers doing business in the state.

The three companies—Uber, Lyft, and DoorDash—introduced a 17-page proposal entitled the Protect App-Based Drivers & Services Act, which would ensure that "an app-based driver is an independent contractor and not an employee or agent" provided certain conditions are met by the company.  The proposal would require an earnings guarantee for drivers, a health care subsidy, insurance coverage for injuries or accidents occurring on the job, and discrimination and sexual harassment protections.

AB-5, passed by the California senate in September, codifies the controversial "ABC" test established by the California Supreme Court in its infamous 2018 Dynamex decision and would likely result in thousands of gig workers—such as Lyft and Uber drivers—being reclassified as employees.  The law has come under scrutiny for, among many other reasons, the drastic impact it could have on the gig economy and employers doing business in California. 

The gig companies' proposal is an attempt to undo the enactment of AB-5, and, as discussed above, tackles many of the criticisms levied at gig economy employers that served as an impetus for the introduction of AB-5 in the first place.  According to the three companies, AB-5 "could take away driver flexibility… limiting their earnings or potentially eliminating the opportunity to earn on these platforms entirely."  The release accompanying the proposed measure stated that it was backed by a coalition of drivers and business and community leaders.

Outlook:  The plan is for the proposed measure to be included on the November 2020 ballot.  Uber, Lyft, and DoorDash had submitted a similar proposal to lawmakers in hopes of preventing the passage of AB-5.  It is noteworthy that it embodies a proposal that some on the left have offered—the creation of a separate class of workers who, while not employees, are nevertheless entitled to certain protections and benefits that employees receive.