California has just passed a bill that could transform the exploitative, tech-driven, gig economy and open the door for a new, potentially more cooperative, future for gig and contract workers across the state. The landmark legislation is Assembly Bill 5, or AB5 as it is now commonly known, which was initially introduced by Lorena González (D-San Diego) as a response to a decision made by the California Supreme Court regarding how companies classify workers. AB5 will mandate that companies no longer use contracts as a way to avoid workers benefits such as sick pay, minimum wage, or health care and social security contributions.
“AB5 has raised, in public consciousness, that idea that flexibility does not have to come at the cost of employment. They are not mutually exclusive,” says Ra Criscitiello, deputy director of research at the Service Employees International Union-United Healthcare Workers West (SEIU-UHW), a 150,000-member-strong labor union.
The bill is squarely targeted at the gig economy. While many see the growing power of platforms like Uber, Lyft, Doordash, Instacart and Postmates as the key target, AB5 will also have broad-ranging impacts for other workers — such as home cleaners or day laborers — who are forced to work as independent contractors, often for low pay. The bill has numerous exemptions for other industries as well, where contract work is common but not necessarily a tool to avoid paying workers their due, such as healthcare, trucking or journalism.
“This problem of misclassification is not a new one, it has been occurring for years in many industries,” says Steve Smith, communications director at the California Labor Federation, based in Sacramento. “What we’ve seen in the last 5 to 10 years is an acceleration of this problem, in part due to the gig companies constructing entire business models around the notion of misclassifying workers.”
AB5 is the first attempt by any state in the US to redefine worker classification in direct response to the growth of the gig economy. Proponents believe it will have wide-ranging impacts, as California is not only the largest state in the country, but the fifth largest economy in the world. It also happens to be where several of the largest gig-platform companies are based, including Uber, Lyft and Doordash. This makes the fact that the state has just passed a law that is opposed by major business interests even more remarkable, and a credit to growing gig worker organizing power.
“The drivers themselves, they’ve been self-organizing with support from labor unions, and that began with the extreme frustration that drivers feel with the treatment they receive at Uber, Lyft and others,” says Smith.
Not surprisingly, Uber, Lyft and Doordash have been leading the opposition to the legislation, spending $90 million and even laying the groundwork to challenge the bill in a voter referendum. That is why Smith believes the real impact of AB5 will come once the implementation starts.
“It is going to take a lot of work and coordination between labor unions, the labor commission, governor’s office and businesses to implement this law in a way that is fair, so that we make sure that companies are not continuing to benefit from the misclassification of workers,” says Smith.
Ensuring that gig platforms can no longer exploit workers through misclassification also presents a need for new models which assure the full profits and benefits of technological innovation don’t end up only in the hands of investors or venture capitalists, but make provisions to include workers. For this reason, SEIU-UHW and Upside Down Consulting, which focuses on worker ownership organizations, have released an early version of what they call the Cooperative Platform Economy Act, which would give platform companies the option of working with democratically controlled Cooperative Labor Contractors (CLCs).
“We’re proponents of organizations that have democratic worker control as a way to retain profits that workers have earned, rather than them going to someone else,” said Criscitiello. “That entity can then contract with the gig companies who want labor.”
The act envisions that CLCs would be capitalized by a loan from the state, and could prove a unique method for preserving the flexibility of the current gig economy, while improving workers benefits and giving them more power to collectively negotiate with platforms.
For now, the Cooperative Platform Economy Act remains a work-in-progress, though Criscitiello hopes that it can be submitted as legislation once it has broad input and buy-in from the labor movement and workers. Regardless, she sees a shift in how new cooperative models are being discussed across the state – and potentially an opportunity to redefine the future of the gig economy.
“There’s definitely growing interest in cooperative structures,” says Criscitiello. “Cities are showing an interest in being supportive, and there’s other movement in this general area that feels like a commitment and an acknowledgment that employment structures that are worker controlled are meaningful.”