With a signature today from California Governor Gavin Newsom, landmark employment bill AB5 is now a game-changing law that could force businesses like Uber and DoorDash to reclassify their contractors as employees.
In his signing message, Governor Newsom wrote that the law will help prevent “worker misclassification,” as he puts it, or “workers being classified as independent contractors, rather than employees, which erodes basic worker protections ... like minimum wage, paid sick days and health insurance benefits.”
AB5 was introduced by Assemblywoman Lorena Gonzalez, a Democrat from San Diego. It clarifies a 2018 California Supreme Court decision known as Dynamex, which already makes it harder for companies to call its workers contractors, not employees. Part of the law says that if workers perform a function that is “integral” to the company’s business, they’re employees, not contractors.
But some businesses are gearing up for a fight. Uber has already said it won’t need to make changes to the status of its workers, claiming its drivers and delivery people aren’t central to its business. “Uber’s business... is serving as a technology platform for several different types of digital marketplaces,” lawyers for the company told the the New York Times.
Meanwhile, Uber, Lyft, and DoorDash have threatened to spend at least $90 million to sponsor a ballot initiative to override the new law. That sum, however, could be far less than what these companies stand to lose if they’re forced to treat their workers as employees
The newly signed law takes effect on January 1, but DoorDash couriers and the like won’t become employees overnight. Workers or labor enforcement agencies will first have to challenge a worker’s classification. Newsom also called for the need to allow gig workers to collectively bargain, an option open to employees, not contractors.