A Bill has just been passed which could threaten the whole gig economy as we know it.
On Wednesday 18th of September, the California state assembly signed the bill, known as AB5 which will force companies to re classify independent contractors as employees.
This doesn’t affect us Uber drivers in the UK but its still an interesting development which could have ramifications for us in the future.
What is AB5?
The Assembly Bill 5 (AB5) ruling will mean that the millions of workers who work as independent contractors through many industries would now become employees and be directly employed by the company they work for.
According to the court, workers have to meet each factor of the ABC test to be classified as an independent contractor.
A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
B) The worker performs work that is outside the usual course of the hiring entity’s business.
C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.
Where Does Uber Fit In With AB5?
A) The recent introduction of being able to see the destination being shown, which now allows us drivers more autonomy in which rides we choose to accept, was clearly implemented to fit in with section A of the ABC test. This was done to demonstrate that Uber drivers are now free from the control and direction’ of Uber and that they are truly independent.
B) Uber are also arguing section B, stating that driving ‘ is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces.’
According to Uber co-founder Travis Kalanick, Uber isn’t a rides company, but a “technology platform that connects riders and drivers.”
C) This one seems to be less of a grey area and I am in agreeance with Uber CEO Dara Khosrowshahi who stated that Uber drivers “run their own business”
Why are Drivers in Support of the AB5 Ruling?
Disgruntled workers have supported the bill on mass, claiming that they deserve the same rights and protection as employees. Currently, Uber drivers do not receive workers benefits such as a minimum wage, holiday pay, health insurance, workers right or the opportunity to join a union.
In my opinion these are all rights that self employed business owners do not enjoy. These drivers came into this gig fully aware that they would be independent contractors. The upside of driving for Uber has always been the fact that you are your own boss and you do set your own hours. If you want the security and benefits of an employee then you should go and work for a company. It seems like these drivers want to have their cake and eat it. They want the freedom of working their own hours with the benefits of an employee.
Being an Uber driver is easy. Being an Uber driver who turns over a good profit is hard. It requires a really strong work ethic, desire, dedication, people skills, customer service mixed in with a strong strategy.
Drivers who understand this are making a good living. Drivers who expect an easy ride are on internet forums complaining and protesting on the streets.
Why are companies like Uber and Lyft opposed to Ab5?
It’s no surprise that rideshare companies are fighting the ruling as it will have a massive impact on their business. Other industries from engineers to hair stylists have successfully lobbied for their workers to remain independent contractors, so Uber and Lyft will continue to campaign against the bill.
According to Barclays, the estimated cost to Uber of reclassifying independent contractors to employees would be around $500 million. With an already estimated loss of $3.9 billion in 2019, Barclays expect Ubers operating loss for 2019 to exceed $4.4 billion.
How will AB5 negatively impact drivers?
The allure of Rideshare has always been the freedom it allows you and Is the reason that I and many people I know, drive for Uber.
When the AB5 ruling comes into effect, it would single handily wipe out tens of thousands of drivers ability to Rideshare as and when it suits them.
According to Tony West, Ubers Chief Legal Officer,
“ If Uber ultimately was forced to reclassify drivers, it would most likely limit driver flexibility. Drivers would not be able to choose when to sign on anytime they want it,” he said. “They would work in shifts like every other employee work in shifts. Drivers would not be able to choose to sign off whenever they wanted to because there would be a set time that they would have to work, they would not be able to do that.”
How will AB5 Negatively Impact Riders?
With a potential cost of $500 million to Uber, the extra expense will have to come from someone and that will very likely be the rider. The cost will invariably trickle down to the riders, potentially ending the cheaper fares they have come accustomed to since the launch of Uber.
Uber could be using scare tactics or simply stating basic economics and business sense, but the fact of the matter is that the AB5 ruling isn’t all positive.
The drivers who have made this gig work for them, are earning a good wage and who rely the flexibility to work around other commitments are going to suffer.
I don’t believe that it will all be all rosy for the drivers that fought for employment. These are the people that already despite the company they ‘partner with’ so why do they think they are going to be happier when their freedoms are taken away and they completely under the thumb of Uber.
How Does AB5 Affect Uber Drivers in the UK?
It doesn’t.
AB5 will only rewrite employment law in California, but it could set a president of how Uber run the company going forwards.
New York for example have already introduced an hourly minimum wage and have started limiting when drivers can log onto the Uber app based on demand.
It’s a really interesting time for Rideshare with the AB5 ruling potentially changing the face of the industry as we know it.
For the time being though, we will continue to enjoy the freedom and flexibility we came into this gig for over here in the UK
