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California: Newsom signs state labor law though gig companies’ fight continues

Gov. Gavin Newsom signed legislation Wednesday morning enshrining a landmark California court ruling to declare more workers employees, rather than independent contractors, launching the next phase of heated negotiations with the tech industry.

The measure, CA AB5 (19R), was the subject of a wide-ranging, yearlong lobbying campaign from virtually every industry and professional group in California. Along the way, numerous professions got carveouts from the bill’s employee classification test — but not contractor-reliant tech companies like Uber, Lyft and DoorDash.

Cementing the more stringent test in law was a priority for organized labor. Union officials and their allies were unmoved by the tech industry’s call to exempt on-demand companies, arguing that workers in the gig economy are being exploited by those firms that have recently scored multibillion-dollar public valuations.

Tech companies have been pushing an alternate deal that would extend wage and benefit guarantees while allowing workers an outlet for organizing, in exchange for retaining the independent contractor classification. Uber, Lyft, and DoorDash have backed that push up by promising to put $90 million toward a ballot initiative if Sacramento does not comply.

Given California’s enormous economy and its status as the home of Silicon Valley, the bill’s progress has been closely watched for potentially setting a national precedent on gig economy workers. The California Labor Federation celebrated AB 5’s signature by suggesting the idea could now spread.

“While this is a huge victory for working people in California, it also shifted the discussion on workers’ rights nationally,” California Labor Federation Executive Secretary-Treasurer Art Pulaski said in a statement. “California’s leadership on this issue opens the door for other states to follow suit.”

After his office facilitated talks between labor and tech all year, Newsom has urged continuing negotiations, saying that California has an opportunity to carve out a new route for workers to organize given the federal policy vacuum created by the National Labor Relations Board opining that gig workers are not employees.

“I will convene leaders from the Legislature, the labor movement and the business community to support innovation and a more inclusive economy by stepping in where the federal government has fallen short and granting workers excluded from the National Labor Relations Act the right to organize and collectively bargain,” Newsom wrote in his signing message.

But the tech companies could face a tough road given organized labor’s clout in Sacramento and the defiant response to AB5 from Uber, which argued that it would not re-classify employees and would fight the issue in court. That angered lawmakers who accused the company of brazenly flouting the law.

“AB 5 will not mean that we wake up tomorrow as employees with a union, but it is an essential first step in forcing the companies to finally give drivers the benefits and protections we deserve. Looking to the future, we recognize the many attempts by Lyft and Uber to avoid compliance with the law and ignore the voices of drivers,” the organization Gig Workers Rising said in a statement.