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California Governor Gavin Newsom has signed a law that will reclassify independent contractors into regular employees, effective January 1, 2020.
Under the new Assembly Bill 5 (AB5), independent contractors—such as rideshare drivers from Uber and Lyft—will now be considered employees.
According to Newsom, being considered independent contractors is a major reason for the drivers’ unfair compensation. As independent contractors, they are only paid for every ride they complete. With the AB5 reclassifying them as employees, the drivers will be entitled to receiving minimum wage, paid sick days, paid family leave, and unemployment insurance.
Based on the AB5, workers can be classified as independent contractors only if they meet three criteria. First, they must not be under the control of the company. Second, they must do tasks that are outside that company’s usual operations. Lastly, they must do independent work or have an independent business with the same nature as the work they do for that company.
The provisions of the new law could affect approximately one million workers in California. Aside from rideshare drivers, it will also apply to laborers in other industries, such as construction workers and janitors.
The law has received both positive and negative reactions. Many drivers and labor groups lauded it because it ensures that workers are protected.
On the other hand, some companies highlighted the disadvantages of the new law. Lyft’s CEO said that the drivers’ reclassification would entail increased costs, resulting in a higher car fare shouldered by the passengers. Reclassifying drivers into full-time employees would also force them into rigid shifts that will deprive them of flexible schedules.