California governor signs Uber, Lyft bill

California Gov. Gavin Newsom (D) on Wednesday signed legislation that will force gig economy companies like Uber and Lyft to treat their workers as employees, setting off what is likely to be a nine-figure political fight next year even as Newsom seeks future changes. 

The measure, Assembly Bill 5, will codify a 2018 state Supreme Court decision into law. Justices in that decision said a worker qualifies as an independent contractor only if they meet three criteria, known as the ABC test. 

{mosads}That suit, backers of the bill say, means gig workers should already be classified as employees. But those workers could face years of lawsuits to force companies such as Uber and Lyft to treat them as such. Passing a new law would eliminate those costly suits.

“Workers would have to sue for enforcement, and that’s not a very practical way to enforce rights. We thought it would be practical to take the Dynamex decision, to codify it into law rather than have five or 10 years of lawsuits,” Assemblywoman Lorena Gonzalez (D), the prime sponsor of the legislation, told The Hill last month. “We’re in this new economy, this tech economy, but in reality it’s work.” 

A Newsom spokesman said the governor would continue to negotiate a middle ground between the legislators who support Assembly Bill 5 and the technology companies that so vehemently opposed it.

“Assembly Bill 5 is landmark legislation for workers and our economy,” Newsom wrote in a signing statement. “The hollowing out of our middle class has been 40 years in the making, and the need to create lasting economic security for our workforce demands action. Assembly Bill 5 is an important step.”

Those companies are gearing up for war. Uber, Lyft and DoorDash, all based in California, said they would put up $30 million each toward a ballot measure meant to overturn the bill.  

“If we aren’t able to reach a deal, then we will take this issue to the voters,” Adrian Durbin, a Lyft spokesman, said last month before the bill passed. “While it’s not our preference, we will go to the ballot if we need to.”

Opponents of the bill also objected to several industries that were carved out of the ABC test so that professionals in the beauty and salon industries and the real estate business could continue to be classified as independent contractors.

Updated at 3:20 p.m.