On Wednesday, May 29 California Lawmakers took a step toward settling whether Rideshare and Lyft drivers are employees or contractors. The state Assembly passed Assembly Bill 5. The bill lays out an “ABC Test” to determine when a worker can be considered a contractor. This test factors in the kind of work being done and the business of the hiring company.
Rideshare and Lyft Drivers Receive Workers Rights Under New Bill
The law grants Rideshare and Lyft drivers, among others, a bevy of legal rights and protections. This includes better pay, benefits and the ability to unionize. Drivers would also have a bit of stability and predictability as employees, especially considering wages.
Drivers from both companies claim that their take-home pay has steadily declined in recent years. Lawsuits filed against Rideshare by drivers have alleged pay as low as $80 per week, after expenses. Earlier in May, a crowd of hundreds turned up in front of The Rideshare’s downtown headquarters. Their protest was against what they said were unfair labor practices. This coincided with a nationwide driver strike.
Bad News for Rideshare and Lyft
For Rideshare and Lyft the law couldn’t be coming at a worse time. This is a crucial time for these ride-hailing companies. Both have recently gone public, and both remain unprofitable. Skepticism about whether these companies will ever make money is widespread among investors. Mandatory Securities and Exchange filings, made by each company listed the prospect of being forced to consider drivers as employees as risks to their businesses.
The bill’s passage is not guaranteed. There is an argument to be made about how this bill trips up the tech model used to build up these companies. Such a change could ultimately have an impact on California’s economy. But the consensus seems to be moving in the direction of employment rights for Rideshare and Lyft drivers.
The reality of this bill is recognizing the validity of Rideshare and Lyft drivers as employees. This distinction is good for the drivers, but not for the profitability of Rideshare and Lyft. Assembly Bill 5 has taken it’s first step towards becoming law. Time will tell what it’s ultimate impact will be.