SACRAMENTO, Calif. – California legislators approved a landmark bill Tuesday that requires companies like Uber and Lyft to treat contract workers as employees, a move that could reshape the gig economy and adds fuel to a yearslong debate over whether the nature of work has become too insecure.
But Uber pushed back on Wednesday. Tony West, Uber's chief legal officer, said in a news conference that it would not treat its drivers, who are independent contractors, as employees under the California bill. He said that drivers were not a core part of Uber's business and could maintain their independent status when the measure goes into effect as state law on Jan. 1. Uber's business, West said, is not providing rides but "serving as a technology platform for several different types of digital marketplaces."
The bill will apply to app-based companies, despite their efforts to negotiate an exemption. On Wednesday morning, the Assembly gave its final approval, and California Gov. Gavin Newsom is expected to sign it. Under the measure, workers must be designated as employees instead of contractors if a company exerts control over how they perform their tasks or if their work is part of a company's regular business.
A coalition of labor groups is pushing similar legislation in New York, and bills in Washington state and Oregon that were similar to California's but failed to advance could see renewed momentum. New York City passed a minimum wage for ride-hailing drivers last year but did not try to classify them as employees.
In California, the legislation will affect at least 1 million workers. Many people have been pushed into contractor status with no access to basic protections like a minimum wage and unemployment insurance. Ride-hailing drivers, food-delivery couriers, janitors, nail salon workers, construction workers and franchise owners could now all be reclassified as employees.
But the bill's passage threatens gig economy companies like Uber and Lyft. The ride-hailing firms — along with app-based services that offer food delivery, home repairs and dog-walking services — have built their businesses on inexpensive, independent labor.
California legislators said the bill, proposed by state Assemblywoman Lorena Gonzalez, a Democrat, would set the tone for the future of work.
"Today the so-called gig companies present themselves as the innovative future of tomorrow, a future where companies don't pay Social Security or Medicare," said state Sen. Maria Elena Durazo, a Democrat. "Let's be clear: there is nothing innovative about underpaying someone for their labor."
Uber on Tuesday laid off 435 workers in its product and engineering teams, the company's second round of recent job cuts.