The gig economy is trying to wake up from a nightmare on Wednesday after California’s state senate passed a law that makes independent contractors like Uber and Lyft drivers company employees.
The surprising new bill has the potential to radically reshape how people get their side hustle on. The legislation also affects other contract workers and makes them eligible for minimum wage, overtime, sick days, and more of the benefits that come with being an actual company employee. While some are touting the bill as heroic, others fear that it might spell the end of the gig economy as we know it.
As reported by the New York Times, the Assembly Bill 5 passed in California’s state senate by a vote of 29 to 11. The bill still needs a signature from the state’s governor, Gavin Newsom. Nonetheless, it will likely to go into effect without issue on January 1. The legislation will apply to all companies operating their business with individuals through an app. This means big shots like Uber, Lyft, Doordash, Postmates, and more are all included.
Currently, people working for these companies—whether it be giving rides or delivering take-out—are classified as independent contractors. Now, companies will have to designate these workers as actual employees.
By doing so, drivers and deliverers will be entitled to the benefits that normal employees get. For instance, they’ll receive minimum wage, sick days, vacation time, Social Security, Medicare, and much more. While this seems great on the surface, the bill might actually end up harming these workers in the long run.
Though the methods of implementing the new requirements aren’t clear yet, it can safely be assumed that companies like Uber and Doordash aren’t going to go down without a fight. After all, experts believe that requiring companies to list their workers as employees rather than contractors will raise operating expenses by up to 30 percent.
Obviously, an extra 30 percent bump in revenue isn’t going to suddenly appear out of nowhere. It is instead going to be passed down to workers and consumers in one form or another. Previously, both Uber and Lyft have warned that drivers will likely need to be scheduled for shifts if such a law goes into place. Meanwhile, this will probably lead to companies limiting how many drivers can work at certain times and in specific markets.
For both sides of the gig economy, this is worst-case-scenario. Ultimately, measures like this will lead to less demand for drivers, which means less opportunity for work. Those that are lucky enough to get a position will have less flexibility than they currently do. Of course, this will be similar for all independent contractors, not just rideshare drivers.
As of now, it is likely that gig companies will band together to push back against this bill. If not, it could spread to other states and wreak havoc. Meanwhile, it serves as a reminder for independent contractors that their side hustle isn’t supposed to be a real job. As such, they shouldn’t expect the flexibility and ease of working via an app while still getting the benefits of being a true employee.