Gig-work bill passes Senate committee as crowds rally

The state Senate’s Labor, Public Employment and Retirement Committee passed California’s groundbreaking gig-work bill, 4-1, at a hearing Wednesday.

The contentious proposal, AB5, took center stage in Sacramento this week, with hundreds of supporters and opponents rallying and testifying as the Senate committee weighed potentially turning hundreds of thousands of independent contractors in the state — such as Uber and Lyft drivers — into employees.

“AB5 is a new and innovative approach to address inequality and dignity in the workplace,” its author, Assemblywoman Lorena Gonzalez, D-San Diego, told the committee. Observers said California’s actions on freelancers could help create a model for the nation.

The bill, which passed the Assembly 53-11 in May, codifies and expands a 2018 California Supreme Court decision known as Dynamex. The ruling makes it harder for companies to claim that workers are independent contractors, saying workers are employees if companies control their activities, if they do work central to the company’s business, and if the workers do not have independent enterprises doing that work.

AB5 supporters say companies misclassify workers as independent contractors to sidestep laws about minimum wage, overtime, workers’ compensation, disability and other benefits that can add some 30% to companies’ labor costs.

But opponents say the legislation would devastate many businesses and hurt workers who prefer the flexibility of setting their own schedules.

The bill could affect scores of industries, but much attention focuses on the gig economy — new companies like Uber, Lyft, DoorDash, Postmates, Instacart and more that use smartphone apps to dispatch workers as drivers and couriers. Barclays investment bank last month said that turning California drivers into employees could cost Uber $500 million a year and Lyft $290 million. Wedbush Securities estimates that California accounts for a sixth of Uber’s ride business and nearly a quarter of Lyft’s business.

Gig companies are feverishly pursuing backroom negotiations in Sacramento with labor leaders, lawmakers and Gov. Gavin Newsom’s office, seeking legislation to let them keep their workers as independent contractors while enshrining new protections for them, such as minimum wage, flexible benefits and an organized voice for their concerns.

“There have been hours and hours and hours of discussions to find a new model that fits the new economy,” said Courtney Jensen, executive director for California and the Southwest at trade group TechNet, in testimony at the hearing. “All sides agree: We need to strengthen and expand the safety net for on-demand workers.”

Uber positions this as a chance to better drivers’ lot, not a fight against reclassification and AB5.

Dynamex “underscored that there was a need to figure out how to improve the quality of independent work,” said Tony West, Uber general counsel, in an interview on Wednesday. “Independent work needs to be uplifted (to have) as much dignity and protection/security as any other line of work.”

He’s “cautiously optimistic” that gig companies and unions will reach a consensus.

Outside the hearing, hundreds of supporters and opponents crammed into the hallway. Many wore colorful T-shirts reflecting their membership in unions from across the state, which back the bill. On the opposing side, drivers supporting the companies wore shirts that read “I’m Independent!” in large writing or displayed the pink Lyft logo.

Adam Wood, 51, a firefighter from San Francisco, said he came to support the bill because he worries that the gig-worker economy is exacerbating the city’s affordability crisis. He said he’s responded to emergencies in apartments where dozens of gig workers are jammed into small bedrooms with bunk beds because they can’t afford better living conditions.

“It’s causing the fabric of our society to fray,” Wood said. “There has to be some social responsibility on the part of these companies for their employees.”

Some Uber and Lyft drivers support the bill; others oppose it. On Tuesday, the ride-hail companies held a rally outside the Capitol with dozens of drivers and others from around the state who supported the bill. Drivers were handed “I’m Independent!” T-shirts and ate free lunch from a half-dozen food trucks the companies hired.

Tommy Hartway, 56, an Uber driver from Sacramento, blasted the bill as he stood in line for barbecue on Tuesday. He said he left his previous job as a loan officer to drive because his independent-contractor status allows him to set his own schedule, and that flexibility is critical given he cares for two disabled adult children.

“It’s given me freedom, life-changing freedom,” Hartway said. “Don’t take that ability away from me, please.”

After Wednesday’s vote, hundreds of union members and drivers rallied on the Capitol’s steps, chanting “Pass AB5, help workers survive.”

Assembly Speaker Anthony Rendon, D-Lakewood (Los Angeles County), blasted tech companies, saying terms like “gig economy” are used to downplay what amounts to economic exploitation.

“It’s (expletive) feudalism all over again,” he told the roaring crowd.

Linda Valdivia, 66, an Uber driver, said at the rally that ride-hailing companies “treat us like we’re disposable.” She said it’s too late for the tech firms to patch up their track record on employee wages, so the Legislature must step in.

“These companies, like Lyft and Uber, are getting richer and richer every year, and the drivers are getting poorer,” Valdivia said.

AB5 exempts a lengthy list of professions, primarily ones in which the practitioners set their own rates. On Wednesday Gonzalez added construction contractors, business-to-business services, freelance writers, fine artists, grant writers, graphic designers and podiatrists to that list. The carve-outs also include doctors, dentists, lawyers, architects, accountants, engineers, insurance agents, investment advisers, direct sellers, real estate agents, hairstylists, barbers, estheticians and electrologists.

Truckers, who have filed two lawsuits saying the bill does not apply to them, potentially could be exempted as well, although Gonzalez said that that industry historically has misclassified drivers.

The bill, which all sides agreed needs more revisions, next goes to the Senate Appropriations Committee. If passed there, it would head to the full Senate floor, probably in September. Gov. Newsom, who has strong alliances with both labor, which backs the bill, and technology companies, which oppose it, has not signaled whether he would sign it but is pushing the two sides to negotiate a deal.

“I’m into compromise,” Newsom told The Chronicle’s It’s All Political podcast last month, while dodging questions about his views on AB5. “I’ve been trying to seek it for many, many months.”

Carolyn Said and Dustin Gardiner are San Francisco Chronicle staff writers. Email: [email protected][email protected] Twitter: @csaid@dustingardiner