By Joe Carrieri, Chairman of the Board, Associated Builders and Contractors, Central California
Uber and Lyft may have to suspend service to Californians thanks to a court ruling that forces them to comply with a state labor law that changes the definition of Independent Contractors.
This is the result of Assembly Bill 5 (AB5)– which Gov. Gavin Newsom signed into law last year – and it affects millions of workers in the gig economy.
Actors, artists, truck drivers, tutors, nannies, web developers, and creatives – those whose earnings are reported on a 1099 instead of a W-2 – make up about 10 percent of the U.S. workforce. Additionally, California is the leader in gig economy workers; an astounding 1.6 million Americans earn a living through work like ride sharing and food delivery, according to the Bureau of Labor Statistics. Often, the flexibility afforded by contract work is essential to the worker’s circumstances, be it they are a student, “starving artist,” or caretaker.
AB5 has disastrous implications for employers, and those who depend on their Independent Contractor status, and will have ripple effects on the economy.
On the surface, AB5 entitles workers to benefits like worker’s comp, sick pay, time off and minimum wage, but reclassifying contractors as employees increases costs, which means businesses will be forced to adapt. They can either, a.) leave California (for places like Texas, Nevada, etc. like they have been), b.) pass the cost onto the consumer (which we may well see when companies like Uber have to pay for things like overtime), or c.) scale back hiring and/or automate their operations (which means less jobs). Thus, the very people AB5 claims to protect, employees, are in fact harmed by the outcome of bleaker opportunities for employment.
Worth noting is that Congressman TJ Cox voted for a federal version of AB5: The Protecting the Right to Organize (PRO) Act, which passed in the House of Representatives earlier this year. The PRO Act takes its cue from AB5, and if passed, would pose a threat to our nation’s economy and the will of the worker that built this great country.
Congressman Cox not only voted for the PRO Act, but also is one of its 218 co-sponsors, indicating his early support of what would extend the same faulty, one-size-fits-all logic of AB5 – the logic that is causing California businesses and workers to flee the state to the rest of the country.
If Uber and Lyft shut down, not only does it impact the gig economy, but thousands of Kern County workers, and their families who rely on ride sharing for essential transportation to earn a living.
Congressman Cox’s sponsorship of a bill that threatens millions of American jobs and businesses is especially concerning in a time of such dire economic conditions in California – which faces a swelling homelessness crisis here and across the nation.
Uber and Lyft suspending service, against the backdrop of a recession and a global pandemic, would exacerbate the challenges being faced by American families, who have already been through enough.