A fierce battle over defining employees in California nears decisive vote

SACRAMENTO —  Residents of California’s capital city might not have been following every development in the sweeping summertime effort to remake state employment law, but it was hard to ignore the sound of protests circling the historic statehouse this week.

Ride hailing drivers and truckers took to Sacramento’s downtown streets to honk their horns in protest of Assembly Bill 5, legislation that seeks to limit the number of Californians classified as independent contractors. Supporters of the bill, meanwhile, responded by stepping off sidewalks and into the roadways to block the vehicles — bringing the city’s downtown traffic to a crawl.

The uproar will reach a crescendo next week as the Legislature takes its final votes on AB 5. Should it pass, Gov. Gavin Newsom has signaled that he will sign it into law.

“Reversing the trend of misclassification [of workers as independent contractors] is a necessary and important step to improve the lives of working people,” the governor wrote in a Labor Day op-ed column in the Sacramento Bee.

A handful of changes were made to the bill on Friday, a legislative effort to align state law with a 2018 ruling by the California Supreme Court that significantly expanded the number of workers who must be provided benefits as business employees. But in seeking to codify how the court ruling will affect scores of professions, AB 5 has sparked an intense battle between two of the state’s most powerful political forces: organized labor and big business.

It has also given rise to tough questions for Newsom and legislative leaders about whether traditional employment rules should govern the kind of part-time work on which California’s sharing — or “gig” — economy has come to rely.

For weeks, the focus was on what kinds of jobs would be exempt from the new employee mandates under AB 5. A variety of industries have tried to cajole lawmakers to keep their businesses out of the bill, to varying degrees of success. Insurance brokers and some who work in real estate professions, marketing and the arts would remain subject to the rules that existed before the 2018 court ruling.

The latest amendments added referral agencies for just three professions to the list: educational tutors, tow truck drivers who work with the American Automobile Assn. and dog groomers.

Assemblywoman Lorena Gonzalez (D-San Diego), the bill’s author, said a parade of individuals and interest groups have come to her looking for deals. She has told some, including an independent golf tutor who wondered if he could still go to a course to teach his lessons, that the bill wouldn’t apply to them. Others, such as members of the recording industry, are still working on finding a compromise with performers and their unions.

“Some people we had to say no to,” Gonzalez said.

Among those left out is the newspaper industry. The trade group representing California newspapers urged lawmakers to exclude delivery workers from being classified as employees, saying the move could further weaken the fiscal health of some publications. Management of the Los Angeles Times, as well as the paper’s editorial board, supported the failed effort for a carve-out.

Gonzalez argued that the workforce of newspaper carriers comprisesimmigrants and those from low-income families who use their own vehicles to deliver papers.

“It’s a classic case of misclassification,” she said. “I’m sorry. You just have to fix it.”

Of the occupations left off the list of those exempt from the legislation, none was more noticeable than drivers and delivery workers for tech companies such as Uber, Lyft, Postmates and Doordash. In spite of the companies’ lobbying efforts and a series of attempts to sway public opinion with in-app campaigns sent out to riders and drivers, Gonzalez and organized labor groups refused to back an exemption for the tech companies.

For much of the spring and summer, those companies worked on a possible compromise with labor that would create a third category for their workers, allowing them to keep operating as contractors while being afforded some employee perks such as portable benefits that can be carried from job to job. The companies then asked for a separate piece of legislation to address their concerns, and plan to do so again in coordinated events in Sacramento, Los Angeles and San Diego.

That effort, though, looks to be futile.

“I don’t see that happening,” Senate President Pro Tem Toni Atkins (D-San Diego) said last week in an interview with The Times.

Last month, a trio of Silicon Valley companies announced a $90-million ballot measure effort to address their demands for worker flexibility. The companies are working on ballot language and a coalition strategy, with the goal of collecting voter signatures by the fall of this year for a proposal to appear on next November’s statewide ballot. In the meantime, the companies plan to continue their marketing efforts, hoping to bring awareness to how an employee model would affect their businesses.

Uber’s chief legal officer, Tony West, told The Times it would be harder to meet customer demand while maintaining drivers’ flexibility under AB 5.

“It would not be ‘choose when you want to work,’ it would be shift work,” he said.

The provisions announced Friday were the sixth series of amendments made to AB 5 since its introduction last December. They are also likely to be the last — Friday marked a key legislative deadline for most bills.

Unlike most negotiations at the Capitol, the bill’s opponents in the business community started off at a significant disadvantage. Labor groups and other advocates for enhanced worker rules often pointed out that AB 5 wasn’t a do-or-die issue for them, that they could simply walk away and leave the court ruling to determine who must be treated as an employee. That included a new three-part test to determine a person’s correct employment status, one that could ultimately affect more than a million California workers, a number of whom work in low-wage jobs.

Gonzalez said she’s optimistic the bill will pass, citing the recent court decision in arguments to her colleagues for why they should support it.

“What we keep coming back to and explaining is we could do nothing,” she said. “We could continue to have a murky law that’s been in existence for year and a half or we could add some clarity.”