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California passes Landmark Bill to redesign Gig Economy

SACRAMENTO – The Californian legislature passed a landmark law on Tuesday requiring companies such as Uber and Lyft to treat agency workers as employees. This move could change the gig economy and fuel the years of debate over the nature of work to become uncertain.

The bill was passed in the Senate with 29 to 11 votes and applies to app-based companies, although they seek to negotiate an exception. California Governor Gavin Newsom approved the bill this month and is expected to sign it. Under the measure, which would enter into force on 1 January, employees must be designated as employees instead of contractors if a company exercises control over the performance of its duties or if its work is part of a company's regular business.

The legislation affects at least one million workers in California who have gone through the decade-long trend of outsourcing and franchising work, resulting in relationships between employers and employees at arm's length. Many people have been granted the status of contractor without having access to basic protection measures such as minimum-wage and unemployment insurance. Drivers, couriers for grocery deliveries, janitors, nail technicians, construction workers and franchisees were all now classified as employees.

But the passing of the bill threatens gig-economy companies like Uber and Lyft. The Ride Hail companies, along with app-based services that deliver groceries, home repairs, and dog walks, have built their business on inexpensive, independent labor. According to Uber and Lyft, who employ hundreds of thousands of drivers in California, contract work gives people flexibility. They warned that recognizing drivers as employees could destroy their business.

The bill, which codifies and extends a California Supreme Court decision of 2018, may affect other states. A coalition of working groups is pushing for similar legislation in New York, and bills in Washington State and Oregon that resembled those in California but did not move forward could experience renewed momentum. New York City passed a minimum wage last year for drivers who go by car, but did not try to hire them as employees.

and the author of a book on so-called cracking in the workplace. He argued that the bill could set new standards for the protection of workers and force entrepreneurs to reconsider trust in contractors.

"This is particularly critical, as this will affect the development of other business models." Because said:

The Californian legislature said the bill, known as Assembly Bill 5 and proposed by Democratic MEP Lorena Gonzalez, would specify the tone for the future of the work.

"Today, the so-called gig companies are present themselves as the innovative future of tomorrow, a future in which companies pay neither social security nor Medicare," said Democratic Senator Maria Elena Durazo. "Let's be clear: it's not innovative to underpay someone for their work."

She added, "Today we are determining the future of the California economy."

Gig work has been in the limelight for years Companies like Uber, Lyft and DoorDash in the US, Didi Chuxing in China and Ola in India have grown into giants, even though the contractors they request do not have the advantages guaranteed minimum wages for employees. Many of the companies have been working hard to repress their efforts to classify their employees as workers, settle class action lawsuits against drivers and obtain exemptions from regulations that could jeopardize the status of drivers as freelancers.

Three other states – New York, Alaska, and Oregon – had found that the drivers who denounced the trip were federal employees for unemployment insurance purposes. These findings could be overridden by state laws in which drivers are expressly designated as contractors. About half of the states had issued such provisions.

More recently, the tide began to change. Two federal proposals introduced since 2018 have sought to redefine the way workers are classified so that more of them can organize. These proposals were supported by candidates for the nomination of the Democratic President, including Senators Kamala Harris, Bernie Sanders and Elizabeth Warren. The president's hopes also supported the California bill.

In the United Kingdom, Uber has appealed against a Labor Court decision requiring drivers to be classified as workers entitled to a minimum wage and minimum leave. The country's Supreme Court is expected to put forward arguments next year.

"Some benefits for a given driver population seem inevitable," said Lloyd Walmsley, a stock analyst at Deutsche Bank, who tracks the exciting industry

A critical question is how gig-economy companies are responding to the new California law become. Industry representatives have estimated that costs increase by 20 to 30 percent when relying on employees rather than outside companies.

Uber and Lyft have repeatedly warned that they need to schedule drivers in advance if they are employees when and where they want.

Experts said there is nothing on the bill that requires employees to work shifts, and that Uber and Lyft are legally entitled to continue giving drivers the opportunity to make their own planning decisions.

In practice, Uber and Lyft may choose to limit the number of drivers who can work in slow hours or in less busy markets where drivers may not generate enough tariffs to justify their wage bill as employees , Overall, this could lead to lower demand for drivers.

Veena Dubal, a professor at Hastings College of the Law at the University of California, said, however, that it was generally beneficial for Uber and Lyft to rely on incentives such as bonuses to ensure that there were enough drivers traveling around be able to adjust faster to customer demand than if they were to schedule drivers in advance.

"It makes no sense for them" to drastically reduce flexibility, she said.

Some of the companies are not ready to fight the bill. Uber, Lyft and DoorDash have committed to spend $ 90 million on an election initiative that would essentially exempt them from the legislation. Uber also said that it will contest claims by drivers in arbitration due to misclassification and urge the legislator to consider a separate bill, which they submit to A.B. Impact of 5 when the legislature begins in January.

California's cities will have opportunities to enforce the new law. In short-term changes to the measure, the legislator has granted large cities the right to sue companies that fail to comply with the rules.

The bill was not generally supported by the drivers. Some argued against it because they feared it would be difficult to stick to a flexible timetable. After Uber and Lyft sent messages to drivers and drivers in California in August asking them to turn to lawmakers on behalf of the companies, legislators said they had noticed an increase in calls Hailing companies were seeking an agreement which would create a new category of worker between contractor and employee. They met with working groups and Governor Newsom's office to negotiate an agreement that would give drivers a minimum wage and the right to organize, but not classify them as employees.

However, in July and August failed working groups and the proposal deal dissolved. Some company representatives have expressed cautious optimism in recent days to conclude a collective agreement after the adoption of the bill.

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