California's new AB5 law will classify ride-hailing drivers as employees, granting them benefits and protections under employment law. This changes the status quo where drivers were independent contractors. While the law aims to prevent misclassification of workers, Uber and Lyft argue it will reduce flexibility for drivers. They have proposed an alternative system of voluntary benefits instead of employee status and are pursuing a ballot measure to exempt their companies from AB5.

1. New California Bill Will Make
Ride-Hailing Drivers Employees
Haffner Law

2. California governor Gavin Newsom signed the Assembly Bill no. 5 (AB5) into law on September 2019.
The “gig work” legislation causes massive changes in the state’s employment landscape as hundreds of
thousands of independent contractors can become employees, including ride-sharing drivers.
This new law will help prevent worker misclassification. Laborers wrongly classified as independent
contractors now have access to rights and benefits, including a guaranteed minimum wage, workers’
compensation, sick leave, family leave, and disability and unemployment insurance.
Experts say classifying workers as employees add up to 30 percent to a company’s labor expenses.
AB5 Provisions
AB5 uses a three-part criterion to determine whether a worker is an independent contractor or an
employee. A true independent contractor has control over their own work, performs tasks not central
to the employer or hirer’s business, and has an independent business in that trade.

3. However, many businesses said the new law would affect their operations negatively. Many rely on
third-party providers for their efficiencies and conveniences. Some independent contractors have
expressed their concerns as well, saying the AB5 law strips them of the flexibility they need.
Currently, the law exempts several professions to protect certain industries, including doctors,
dentists, architects, lawyers, accountants, engineers, real estate agents, barbers and hairstylists who
hire booths at salons, and more.
Uber and Lyft’s Counterproposal
Ride-hailing giants Uber and Lyft were not pleased with the law. The two companies co-wrote an op-
ed piece published in the San Francisco Chronicle wherein they offered a counterproposal.
Instead of classifying the drivers as employees, Uber and Lyft suggested they adopt a system of
worker-determined benefits, which include paid time off, retirement planning, and lifelong learning.
Uber and Lyft’s proposal was met with outrage from Los Angeles ride-hailing drivers.
The two companies, along with other app-based companies, formed the Protect App-Based Drivers &
Services group. The group launched a 2020 ballot referendum to exclude ride-hailing apps from AB5.

4. Sources:
 https://www.latimes.com/business/la-fi-tn-uber-lyft-contractor-drivers-
20190612-story.html
 https://www.citylab.com/transportation/2019/06/gig-economy-
employment-law-california-bill-ab-5-uber-lyft/591565/
 https://www.sfchronicle.com/business/article/California-Assembly-
passes-gig-work-bill-13904777.php?psid=grTbd
 https://www.haffnerlawyers.com/
 https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=2019
20200AB5
 https://hbr.org/2019/09/what-californias-new-gig-work-law-gets-wrong-
about-gig-work
 https://fortune.com/2019/11/08/california-gig-economy-bill-uber-lyft-
ab5/