Uber and Lyft should treat contract workers in California as employees according to historic legislation approved by lawmakers that could reform the gig economy and drastically change the driving industry.
The historic bill – which passed Tuesday 29-11 in the upper house of the state legislator – has been bitterly challenged by tech giants such as Uber and Lyft.
The ride hailing companies rely heavily on the job economy where employees are hired in the short term without benefits such as healthcare or minimum wage.
The bill, to be approved by Governor Gavin Newsom, requires California employees to be designated as employees rather than contractors if their work is controlled by the company.
Uber and Lyft have already warned that such legislation would seriously damage their business models, in part because of the costs associated with reclassifying drivers as employees.
The historic bill – which passed Tuesday 29-11 in the upper house of the state legislator – has been bitterly challenged by technical giants such as Uber and Lyft but supported by labor groups
Some have said that the potential costs can bankrupt their companies.
Apart from that, it appeared on Wednesday that Uber had fired 435 employees from his engineering and technology teams in the midst of a & # 39; shift & # 39; in the design of the organization.
The cuts mean that around 170 people in the company's product group and 265 people in engineering have been left out.
The company, which reported a loss of $ 5.2 billion in the second quarter of 2019, promised to continue to hire some of the very best talent in the world & # 39 ;.
The legislation, which is closely monitored in other states, responds to critics who claim that companies like Uber and Lyft are failing drivers by denying their employee benefits.
The law, if in force, challenges the business model of rideshare platforms and others that depend on employees who & # 39; appearances & # 39; as independent contractors.
Under Assembly Law 5, California employees must be designated employees, not contractors, if their work or performance is controlled by the company and part of that company's regular business.
The law imposes a test to determine whether employees can be labeled as contractors.
On Wednesday, it turned out that Uber had fired 435 employees from his engineering and technology teams in the midst of a & # 39; shift & # 39; in the design of the organization.
Uber and Lyft have already warned that such legislation would seriously damage their business models, partly due to the costs of reclassifying drivers as employees
The employee must be free from control of the company, perform work & # 39; outside the normal course of business of the user of the user company & # 39; and are involved in an independently established business, profession or business of the same nature as the work they perform.
Uber, Lyft and meal delivery companies such as Doordash and Postmates still hope that Newsom can negotiate a new proposal with trade unions that would create a separate set of rules for cigarette workers.
They have proposed an hourly basis for employees, paying a fund for benefits including coverage for accidents and ensuring & # 39; sectoral negotiations & # 39; where workers throughout the industry could organize.
Several companies have threatened to spend $ 90 million on a voting measure next year if they don't get their way.
Lyft and Uber have argued that a large number of their drivers want to be able to work according to their own schedule without the limitations of full-time employment.
Lorena Gonzalez, the democrat who drafted the bill known as Assembly Signature 5, said the legislation helps protect drivers and stops platforms from relieving social costs.
"We cannot wait while companies pass on their own costs of doing business to taxpayers and responsible companies in California, while millions of employees are denied the labor protection they are entitled to," said Gonzalez.
Dozens of proponents of a measure to limit when companies can label employees as independent contractors at the Capitol in Sacramento before the law is approved
She said that nothing in the law forces companies to eliminate the flexibility of employees.
As employees, employees would be entitled to minimum wages and benefits such as compensation for employees, unemployment insurance and paid leave.
& # 39; This is a huge win for employees across the country! & # 39; tweet the California Labor Federation, which approved the bill.
& # 39; It is time to rebuild the middle class and ensure that ALL employees have the basic protection they deserve. & # 39;
The lower house, which has already adopted the bill, will now vote on the amendments introduced by the senate before moving to Gov. Newsom is sent.
Newsom is expected to sign the law after declaring its support for the measure last week.
But he said he was talking to Lyft and Uber about a possible compromise, according to the Wall Street Journal.
The report said the governor intended to stay at the negotiating table & # 39 ;.
Once a favorite of both progressive and intractable economists, they endure start-up apps that rely on the gig economy, increasing political pressure, as well as flattening or falling stock values when investors are worried about possible legislation.
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