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California governor backs bill that could revoke IC status for Uber, Lyft drivers and others

September 04, 2019

California Gov. Gavin Newsom came out in favor of the state’s Assembly Bill 5 which would codify the more strict “ABC” test for independent contractor misclassification into law. It’s also legislation that human cloud firms such as Uber Technologies Inc. (NYSE: UBER) and Lyft Inc. (NASDAQ: LYFT) have fought over concerns that it could require them to treat their drivers as employees.

Other human cloud firms and companies have also come out against the law with concerns.

Newsom announced his support of the law in an opinion piece on Monday in The Sacramento Bee newspaper.

“Reversing the trend of misclassification is a necessary and important step to improve the lives of working people,” Newsom wrote. “That’s why, this Labor Day, I am proud to be supporting Assembly Bill 5, which extends critical labor protections to more workers by curbing misclassification.”

Human cloud firms and other businesses have come out against AB 5, including newspaper publishers. The California Newspaper Publishers Association asked its members to carry op-ed pieces opposing the law, saying it could be the death knell for printed newspapers.

“AB 5 would force all businesses to hire independent contractors as employees — unless the business has been given a special exemption by the Legislature,” according to one of the op eds. “So far, the Legislature has refused to grant one to the newspaper industry. That’s critical because although many newspapers are union-represented shops, they rely on independent contractors in the form of newspaper delivery carriers and freelance journalists.”

AB 5 was approved by the state Assembly on May 29, but still needs approval from the state Senate. It codifies the “Dynamex” decision made by the California Supreme Court that requires the use of the ABC test for determining independent contractor misclassification.

Uber and Lyft have opposed the law.

“The passage of this bill could lead to additional scrutiny of the independent contractor classification of drivers using the Lyft platform in California,” according to Lyft’s most-recent quarterly report filed with the US Securities and Exchange Commission. “Such regulatory scrutiny or action may create different or conflicting obligations on us from one jurisdiction to another.”

Separately, they — along with human cloud, food-delivery firm Door Dash — recently pledged $30 million each to get a ballot measure before voters that would allow a vote on whether to allow human cloud drivers to remain independent contractors.