Uber Claims It Won’t Need To Change Its Business Despite Landmark Gig-Worker Law

Uber Protest

An Uber/Lyft driver holds up a sign while circling the headquarters of Uber during a protest in August 2019. A bill to change the status of drivers passed, but Uber won't reclassify its work force.

ASSOCIATED PRESS

Uber says it does not expect to make any changes to the way it classifies drivers in California, despite a landmark bill passed by California lawmakers on Wednesday that effectively requires businesses across industries to reclassify independent contractors as employees. Instead, Uber says it is prepared to fight any legal challenges in court and has set aside an additional $30 million for a ballot measure to provide workers with other benefits.

“We expect we will continue to respond to claims of misclassification in arbitration and in court as necessary, just as we do now,” Tony West, Uber’s chief legal officer, told reporters during a press call on Wednesday.

Uber’s argument hinges on the belief that it will meet the standards of the stricter employment test set forth by the bill. California lawmakers passed Assembly Bill 5 on Wednesday, which largely requires companies to convert independent contractors to employees if their work is part of the company’s main business or the company exerts control over their work.

Uber argues its main business is not drivers and rides, but being a “technology platform for several different types of digital marketplaces.” It also allows drivers to be signed into multiple services, from Lyft to food delivery companies, at once. Because the company believes its workers will still be classified correctly under the new measure, West said Uber will not be automatically reclassifying drivers to be employees in January, when the measure is likely to take effect.

Both Uber and Lyft stock closed in the green on Wednesday on the news that Governor Gavin Newsom, who had already promised to sign the ball, remains in talks with the companies, as first reported by the Wall Street Journal.

Uber’s defiant stance is a throwback to its earliest days of ride-hailing where it made similar arguments that existing laws around taxis and transportation also didn’t apply to its business. There were a lot of lawsuits and a lot of compromises, but Uber eventually tried working through the regulatory red-tape (once it recognized it was there in the first place.)

The employment status of its workers has also been a long-standing fight, and one that the company is clearly anticipating to continue to fight in court. The “gig economy” was largely built off companies from Uber to TaskRabbit to DoorDash utilizing independent employees who could set their own schedules, but didn’t receive benefits like healthcare.

West made it clear that he doesn’t think Uber should be exempt from the rules – the company just doesn’t believe the new bill would result in any change to its employment workforce. “Just because the test is hard, it doesn’t mean we will not be able to pass it,” West said. If anyone disagrees with them, including cities, they would have to challenge Uber directly in court. The company has repeatedly faced court cases, often settling with drivers, but not changing their employment status.

As part of its response, Uber is also coordinating with its rival Lyft to propose a new ballot measure that would offer better benefits for their independent contractor workforce, including a base pay rate. The companies had tried to float it as a compromise during the bill talks, but AB5 passed regardless.

Lyft, who also committed $30 million to the ballot measure, said the state had “missed an important opportunity” when it came to regulating the space.

"The fact that there were more than 50 industries carved out of AB5 is very telling,” Lyft said. “We are fully prepared to take this issue to the voters of California to preserve the freedom and access drivers and riders want and need.”

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Uber says it does not expect to make any changes to the way it classifies drivers in California, despite a landmark bill passed by California lawmakers on Wednesday that effectively requires businesses across industries to reclassify independent contractors as employees. Instead, Uber says it is prepared to fight any legal challenges in court and has set aside an additional $30 million for a ballot measure to provide workers with other benefits.

“We expect we will continue to respond to claims of misclassification in arbitration and in court as necessary, just as we do now,” Tony West, Uber’s chief legal officer, told reporters during a press call on Wednesday.

Uber’s argument hinges on the belief that it will meet the standards of the stricter employment test set forth by the bill. California lawmakers passed Assembly Bill 5 on Wednesday, which largely requires companies to convert independent contractors to employees if their work is part of the company’s main business or the company exerts control over their work.

Uber argues its main business is not drivers and rides, but being a “technology platform for several different types of digital marketplaces.” It also allows drivers to be signed into multiple services, from Lyft to food delivery companies, at once. Because the company believes its workers will still be classified correctly under the new measure, West said Uber will not be automatically reclassifying drivers to be employees in January, when the measure is likely to take effect.

Both Uber and Lyft stock closed in the green on Wednesday on the news that Governor Gavin Newsom, who had already promised to sign the ball, remains in talks with the companies, as first reported by the Wall Street Journal.

Uber’s defiant stance is a throwback to its earliest days of ride-hailing where it made similar arguments that existing laws around taxis and transportation also didn’t apply to its business. There were a lot of lawsuits and a lot of compromises, but Uber eventually tried working through the regulatory red-tape (once it recognized it was there in the first place.)

The employment status of its workers has also been a long-standing fight, and one that the company is clearly anticipating to continue to fight in court. The “gig economy” was largely built off companies from Uber to TaskRabbit to DoorDash utilizing independent employees who could set their own schedules, but didn’t receive benefits like healthcare.

West made it clear that he doesn’t think Uber should be exempt from the rules – the company just doesn’t believe the new bill would result in any change to its employment workforce. “Just because the test is hard, it doesn’t mean we will not be able to pass it,” West said. If anyone disagrees with them, including cities, they would have to challenge Uber directly in court. The company has repeatedly faced court cases, often settling with drivers, but not changing their employment status.

As part of its response, Uber is also coordinating with its rival Lyft to propose a new ballot measure that would offer better benefits for their independent contractor workforce, including a base pay rate. The companies had tried to float it as a compromise during the bill talks, but AB5 passed regardless.

Lyft, who also committed $30 million to the ballot measure, said the state had “missed an important opportunity” when it came to regulating the space.

"The fact that there were more than 50 industries carved out of AB5 is very telling,” Lyft said. “We are fully prepared to take this issue to the voters of California to preserve the freedom and access drivers and riders want and need.”

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I’m a San Francisco-based staff writer for Forbes with a focus on Uber, the sharing economy, and startups. I previously worked for Business Insider, Gigaom, and Wired. I...