You Call It the Gig Economy. California Calls It ‘Feudalism.’


In the New York Times Opinion column, Miriam Pawel, comments on some State’s intentions to create perhaps a new labor classification.  Though this debate has been going on for years, it seems that the rise of Uber and Lyft is bringing it to a head.  Here’s her report:

A bill will drive a national debate over how to reshape labor laws so that workers get their fair share in a service and knowledge economy.

Labor leaders cheered in the balcony and lawmakers embraced on the floor of the California Senate on Tuesday as it passed a landmark measure that defines employees, a move that could increase wages and benefits for hundreds of thousands of struggling workers.

But the bill is as much a starting point as an endgame: It will drive a national debate over how to reshape labor laws fashioned in the industrial era of the 1930s to fit a 21st-century service and knowledge economy.

With the measure, which Gov. Gavin Newsom says he will sign, California will lead in a shift that will likely redefine the roles of governments, unions and worker organizations. Just as federal labor laws were promulgated to help the country recover from the Depression, the imperative to extend basic guarantees like a minimum wage stems from the staggering income inequality in California, the state with the highest poverty rate in the country.

The new paradigms will need to fit not the relatively stable industrial work force of the last century but a gig economy in which workers are increasingly likely to hold multiple jobs or report to no workplace at all. California lawmakers took a major step in constructing the foundation of such a model with the new measure, which presumes workers are employees, entitled to all concomitant protections and benefits, unless they meet strict criteria as truly independent contractors.

Although the ride-share businesses Uber and Lyft were center stage in the run-up to the legislature’s votes, they were in fact not the impetus for the new law.

The bill was actually incited by a 14-year-old case in which Los Angeles delivery drivers sued their employer for lost wages after they were abruptly reclassified as independent contractors. Last year, the state’s highest court issued a broad ruling that sought to clarify what had long been a murky legal standard. The decision said workers are presumed to be employees unless a business can meet the “ABC test” — an independent contractor must be free from the control of the hiring entity, perform work outside the normal scope of the hiring entity and be an independent established practitioner of the trade performed. With exceptions for specific professions, the new measure adopts that definition.

The focus on the gig economy has obscured the more widespread impact of the new law in traditional businesses where workers — like the delivery drivers who sued in 2005 — have been misclassified for years. Hundreds of thousands of construction workers, janitors, truckers, nail salon workers and others now paid as independent contractors will be entitled to earn minimum wage and overtime, receive unemployment insurance and family leave, and have bargaining rights. The state hopes the measure will garner it much of the estimated $7 billion a year businesses have evaded paying in payroll taxes; unions hope to recruit new members. Their success will be both an indication of their strength and a key to effective enforcement.

Accurate data is scarce, but a recent estimate suggests about 8.5 percent of people in the California work force in 2016 relied on independent contract work as their primary income. Of those, maybe one in 12 works for app-based companies, while an unknown number supplement their income with part-time gig work. Though they employ about 220,000 drivers in California, the ubiquitous presence of Uber and Lyft and the dissonance between their founders’ extreme wealth and their drivers’ poverty have come to symbolize the crisis of income inequality.

The “new economy, the gig economy, the innovation economy” is “feudalism all over again,” said the Assembly speaker, Anthony Rendon, a Los Angeles Democrat.

Until now, the ride-share drivers have fallen into a labor netherworld, classified as independent contractors by the National Labor Relations Board and thus not entitled to protected union activity. Organizing efforts have bogged down in a welter of court rulings and confusion over federal laws and pre-emptions. A Seattle law to allow ride-share drivers to organize a labor union was struck down by a federal-court decision that only states could confer such a right on independent contractors.

That appears to create an opportunity for California to establish a mechanism for drivers to unionize under the auspices of a state labor board, which could be extended to oversee union activity for other gig workers excluded from federal jurisdiction. Organizations of ride-share drivers, encouraged by their success in helping lobby for the California bill, will take on that goal next.

Ride-share companies will continue to fight the California measure, which they maintain would cripple their business model. Barclays has estimated that to comply next year would cost Uber $507 million and Lyft $290 million. Uber, which insists that its drivers don’t qualify as employees, has said it will force them to make claims for employment status individually. Uber, Lyft and the food delivery service DoorDash have together committed $90 million to financing a 2020 ballot initiative to overturn the law, a quest that would face dubious prospects.

The companies’ offers to give drivers greater benefits and some input have all been rejected as insufficient, but Governor Newsom has said that, even after signing the bill, he will continue to attempt to forge some compromise that might create a third category of worker — not an employee, but an independent worker with certain enforceable rights and benefits.

All of the scenarios suggest rethinking the role of the state in protecting workers’ rights and economic security, accelerating a shift that has been going on for years. As union membership declined, states — in particular California — have been the mechanism to insure benefits including higher minimum wages, access to affordable health care and portable retirement plans.

Uber, which has reported huge losses and laid off hundreds of workers in recent weeks, has warned that the California measure will have broad ramifications. A coalition of labor groups in New York has already proposed legislation modeled on the bill, and Gov. Andrew Cuomo has indicated support, saying he “does not like to lag California in anything.”

In the end, in whatever form Uber survives the changed landscape, it may have served as a vehicle to usher in new models of labor laws for the 21st century.

  • 09/12/19
  • Miriam Pawel