(AmericanProsperity.com) – Businesses usually locate themselves in spots that support them best, whether that’s in a state with low taxes or near the right clientele. With recent employment law changes in California, some companies struggle to continue operating without major changes.
California Reclassifying Independent Contractors as Employees
In September 2019, California Governor Gavin Newsom signed AB5, a state law written to give wage and benefit protection to gig-economy workers, such as Uber and Lyft drivers. The law sought to classify these drivers as employees with basic benefits rather than independent contractors.
Under the law, an employee can only be considered an independent contractor if the following three prongs are met:
- Workers must be free from direction and control of the hiring entity
- The work performed must be outside of the usual business conducted by the hiring entity
- Worker’s tasks must be established before as being independent
While ride-sharing companies are the main target of the law, Journalist Erin Biba shares how the law hurts more than just drivers:
The disastrous AB5 law in California has ended the careers of freelancers across the state in arts, entertainment, and media. Meanwhile it hasn't even come close to achieving its stated goal of protecting gig workers. https://t.co/L0sZtk3AHE
— Erin Biba (@erinbiba) August 20, 2020
California Sues Uber and Lyft
This summer, the state of California sued both Uber and Lyft for keeping their drivers classified as independent contractors, stating they should be classified as employees according to the guidelines above. San Francisco Superior Court Judge Ethan Schulman ruled this week that Uber and Lyft must comply with AB5.
This crackdown on ride-sharing companies comes at a time when they already struggle to turn a profit, due to the lower demand for rides amidst the coronavirus lockdowns.
Lyft Pulls Out of California For Now
To keep themselves afloat, Lyft said it would suspend operations in California at the end of the day on Thursday, August 20. In a statement, Lyft said they are working towards an alternative proposal that would work for all of the drivers and riders, including a minimum earnings guarantee, reimbursements, healthcare subsidy, and accident insurance.
Many people spoke out against the law and recent ruling as fears of these ride-sharing companies leaving the state. Kevin Faulconer, Mayor of San Diego, teamed up with Sam Liccardo, Mayor of San José, in a bipartisan statement to urge California court’s to exempt ridesharing companies from AB5:
As bipartisan mayors of CA’s 2/3 largest cities, we share serious concern for the exodus of ride-share companies statewide. This Friday, nearly 1M gig workers will lose their income in the Golden State—deepening the economic pain felt in our communities during this crisis. pic.twitter.com/QFTwlkRs5k
— Sam Liccardo (@sliccardo) August 19, 2020
Emergency Stay
On Thursday, August 20, an appeals court granted Uber and Lyft an emergency stay, allowing them to continue operations as-is for the time being.
Businesses can only stay in areas where they can turn a profit. As California pushes ride-sharing companies out, a void is being created, leaving many without jobs and transportation in the state. Only time will tell what fills the space left behind.
~Here’s to Your Prosperity!
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