The Gig Companies Strike Back

The battle over how the “gig economy” will be regulated has heated up, and not surprisingly, the front line is in California.

The state of California recently enacted Assembly Bill 5, which will go into effect in January 2020. This bill creates a rigorous set of tests that companies must meet before excluding workers as being considered “employees.”

In response to the legislation, several companies (Uber, Lyft, and DoorDash) have proposed a ballot measure for Californians to consider, which states “an app-based driver is an independent contractor” if certain conditions are met. The ballot initiative also seeks to appease some who have criticized the lack of workplace rights protection and benefits for gig workers. It expressly indicates certain protections and benefits will apply to even gig workers who are not deemed “employees” subject to state laws governing the workplace.

The proposal calls for mileage reimbursement rates to cover gig workers’ gas and vehicle maintenance costs, to be adjusted as necessary for inflation. Drivers who work more than 25 hours per week would receive a stipend covering 82% of the least expensive health plan under California’s health insurance exchange (marketplace). Drivers would be required to undergo criminal background checks to check for those with certain prior felonies, most notably driving under the influence of alcohol or drugs.

While the concessions offered by Uber, Lyft, and DoorDash are undoubtedly welcome, the lack of protections under workers’ compensation laws and employment laws is still largely unaddressed.

Although it appears that workers may be able to purchase policies to provide coverage for work injuries and their potential consequences, it is clear no comprehensive safety net of the sort offered by workers’ compensation laws will be available.  

In the end, while encompassing all sorts of legal and statutory questions that only lawyers (and politicians) could love, it boils down to economic and social policy issues.

While the flexibility afforded by the gig economy on paper is great, is it giving these companies exemption from the protections and benefits that other companies reliant on drivers (such as FedEx, UPS, etc.) must provide in their industries? Will other industries follow suit, making more workers responsible for the consequences of work injuries? Truckers are often independent contractors who must buy their own workers’ compensation and health insurance coverage. However, would a DoorDash driver be able to afford to pay for such coverage? 

As far as social policy, the question is obvious. What role should the state have in protecting workers from the consequences of workplace injuries and the proper extent of employer responsibility? The 1920s saw a movement to have greater state involvement in workplace safety, which replaced a prior laissez-faire attitude encouraged by the Supreme Court.

Are workers today able to negotiate with large companies like DoorDash, Amazon, etc., such that workers’ compensation laws are unnecessary and overly burdensome?

Will taxpayers end up paying for the benefits injured workers need if they suffer severe injury and are not covered by workers’ compensation?

Will legislation of the type California passed inhibit economic growth and innovation?

All are fair and unanswered questions, and the stakes are high for all involved, especially workers.

Some states have already moved to legislate in the opposite manner of California, granting gig companies freedom from regulation as employers. Still, there is no doubt that many are waiting to see what happens in California, the birthplace of the gig economy.



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