Gig economy companies threaten to suspend their services in Calif.

Oct 21, 20203 min read

By Janice Lee and Nancy Zheng Oct. 20, 2020

Ivan Zhu Art

On Aug. 18, Uber sent a push notification to millions of Californian ridesharing customers. The message, “Ridesharing in Calif. may be suspended.,” was Uber’s response to Calif. Assembly Bill 5 (AB 5), a bill aimed to classify gig workers as employees.

AB 5 intended to normalize the employer-employee business model and minimize the unfair economic advantage gig-economy giants have over similar businesses that follow employment standards. Although AB 5 went into effect on Jan. 1, 2020, these app-based companies continued to treat their employees at a contractor level. Consequently, Calif. Attorney General Xavier Becerra and city attorneys from Los Angeles, San Diego and San Francisco filed a lawsuit against these companies, accusing them of deflecting their responsibilities of employment onto taxpayers despite having the resources to shoulder the driver reclassification.

Although the court ruled in favor of Calif., Uber did not comply with the state statute and instead, responded by threatening to employ fewer drivers, enforce stricter driving policies, and terminate their services in Calif. to offset the loss in profit. Ultimately, these app-based companies argued that the new bill would place an economic toll on their businesses by obligating them to provide basic employee benefits—overtime pay and unemployment insurance—and implementing more rigid driving schedules. However, Calif. officials have refuted the companies’ arguments by stating that the law presents no mention of restrictive schedules for drivers, according to CNBC.

Upon the Uber and Lyft’s threat to leave the state, an appeals court granted the companies a postponement that allowed the companies to operate under original policies for an extended period of time.

“Passing AB 5 at the risk of these companies ending their services would cost far too many jobs, since being hired as an independent contractor is part of the appeal of working for Lyft or Uber,” Sophomore Eunwoo Kim said.

Although they were granted a postponement, Uber, Lyft, DoorDash, Instacart and Postmates furthered their opposition to AB 5 by spending $110 million to promote Prop. 22, which, if passed this November, would exempt them from AB 5 and maintain the independent contractor status of gig workers. In addition, Cal-Access reports that both Uber and Lyft have increased their lobbying efforts in Calif., with the former spending over 1.3 million dollars and the latter over 1.4 million dollars from 2019 to 2020.

Unlike the app-based companies who are united in their opposition to AB 5, Uber and Lyft drivers have mixed feelings towards this bill. Some drivers support AB 5: in 2019, Uber and Lyft drivers held numerous strikes to demand employee rights and benefits. CNBC reports that many faced financial instability due to lack of compensation for vehicle damages and overtime work. However, other workers oppose the new bill because they are concerned about being required to adhere to a strict schedule and are terrified about the potential of being laid off.

“Given the current pandemic and economic decline, it is particularly important to provide employee benefits for ride-share drivers. Full enforcement of AB 5 on Uber and Lyft will help more people recognize workers’ rights as a significant issue,” Junior Conner Shih said.

About the Contributors

Janice Lee

Staff Writer

Janice Lee, a senior, is a Staff Writer new to Journalism. Janice likes scouting in various gacha games, taking naps after-school, and reading visual novels.

Nancy Zheng

Investigative Report Editor

Nancy Zheng is a junior at Leland High School and is the Investigative Report Editor and Ad Manager. She is an avid classical pianist and Chinese folkloric dancer of over 11 years. In her free time, she enjoys bullet journaling and obsessing over green tea/matcha.