September 12, 2019
California lawmakers passed a landmark bill (Assembly Bill 5 ) on September 10 that promises to reshape how the peer-to-peer ridesharing and food delivery industries do business.
The legislation passed in a 29 to 11 vote in the State Senate and now moves on to the State Assembly, where if it passes, it will land on the governor’s desk.
The legislation, which is scheduled to go into effect on January 1, 2020, would require gig economy workers to be reclassified as employees instead of contractors, CNBC reports—affecting the operating plans on which Uber and Lyft base their current success.
But shares of Lyft popped more than 7.8% on Wednesday morning, while Uber climbed more than 4.5% after California Governor Gavin Newsom (D) told the The Wall Street Journal on Wednesday that he’s still engaged in talks with Uber, Lyft and other gig economy companies about possible negotiations around the bill. Newsom recently voiced his support for the bill, the news outlet said.
Additionally, CNBC says, the bill has received broad support from Democratic presidential candidates—among them, Senators Elizabeth Warren (D-Massachusetts), Bernie Sanders (I-Vermont) and Kamala Harris (D-California), and South Bend, Indiana Mayor Pete Buttigieg (D).
The bill has the potential to change the employment status of more than 1 million low-wage workers in California, including those at DoorDash, Postmates, and Instacart. It will make it harder for gig economy companies to prove that their workers aren’t staff, while ensuring key benefits and protections, like minimum wage, insurance and sick days.
But predictably, AB5 has attracted staunch opposition from gig economy companies. In an effort to push back against the bill, Uber and Lyft proposed establishing $21-an-hour minimum wage for drivers in California. The ride-hailing companies, as well as Doordash, have also pledged $90 million on a ballot initiative for the 2020 election that would exempt them from AB5.
Lyft spokesperson Adrian Durbin told CNBC that the bill has the potential to hurt drivers who prefer a flexible work schedule.
“Today, our state’s political leadership missed an opportunity to support the overwhelming majority of rideshare drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits,” Durbin said in a statement. ”…We are fully prepared to take this issue to the voters of California to preserve the freedom and access drivers want and need.”
A DoorDash spokesperson said the company was disappointed by the decision, but said it was “committed” to establishing a guaranteed minimum wage, benefits, and other protections for its gig workers.
Representatives from Uber, Postmates and Instacart were not immediately available for comment.
Research contact: @CNBC