Uber and Lyft Want To Evade New California Law By Creating Third Worker Category

The gig economy business model is premised on underpaying part time workers. Any category that does not address this issue is just window dressing. JL

Angela Chen reports in MIT Technology Review:

This week, California passed a bill that would make gig workers—including Uber and Lyft drivers—employees instead of independent contractors. It’s a big blow for ride-hailing firms.Uber, Lyft, and DoorDash have pledged to fund a campaign to let residents vote on whether these workers should have a new classification that is neither employee nor contractor. This “third category” has been implemented in other countries and the results are a cautionary tale. There’s no hard-and-fast rule for what third-category workers receive. "The devil is in the details."

This week, California passed a bill that would make gig workers—including Uber and Lyft drivers—employees instead of independent contractors. It’s a big blow for ride-hailing firms in the state and the start of a long battle. 

A spokesperson for Uber has already stated that it won’t reclassify its workers because drivers aren’t “a core part” of its business. (The new bill, called AB5, clarifies that people are employees if their work is central to the business. Uber’s claim is certain to be debated.) Uber, Lyft, and DoorDash have also pledged $90 million to fund a campaign to let residents vote on whether these workers should have a new classification, one that that is neither employee nor independent contractor.

Though not used in the US, this “third category” has been implemented in other countries—and in some cases, the results are a cautionary tale. Here’s what that category means for Uber and Lyft drivers and the future of work. 

What is this third category of worker? 

In the US, the exact definition and rights of an “employee” can vary at the state level, but there are only two categories of workers: employees and independent contractors. Other countries, though, have more classifications. The United Kingdom, Spain, Germany, Canada, Italy, and South Korea all have this in-between category, according to Miriam Cherry, an employment law expert at St. Louis University. They have different names, such as “worker” in the UK or “trade” in Spain.

What’s at stake? What can third-category workers get and what don’t they get? 

Employees usually receive federal minimum wage and, among other benefits, sick leave, paid vacation time, and Social Security and Medicare contributions. Independent contractors are not entitled to these benefits. In addition, they can’t sue for sexual harassment or gender discrimination under federal law because workplace civil rights laws only apply to employees. 

There’s no hard-and-fast rule for what third-category workers receive. In some countries they receive minimum wage and in others, they don’t. In Europe, one issue of contention was vacation, says Cherry. “Unions and workers have really fought for time for people to take a vacation, but employers have complained, and that is one of the things in their third category that is less generous,” she says. But the US doesn’t have generous vacation leave policies anyway, so ironically, there are fewer rights to lose. 

Another big question is whether third-category workers will be allowed to unionize. Federally, independent contractors are not allowed to unionize, but Uber and Lyft have said they would support sectoral bargaining, which would allow drivers industry-wide to bargain collectively. Before the California bill passed, the companies had tried to negotiate by offering a new $21 hourly minimum wage (but only when a passenger is in the car, so time spent finding passengers and driving to pick someone up doesn’t count).

Cherry points out that it can be extremely difficult to implement a third category. “You’re basically saying they’re not going to get as many rights, so then you have to decide what to take away, and all those things are very difficult decisions,” she says. “I’d have to say I’m against it, because the devil is in the details.” 

How has the third category worked out in other countries? 

The results have been mixed. In the United Kingdom, gig workers in this third category have won minimum wage and paid holidays. But in Italy, many companies simply moved their previously full-time employees into the new category, leaving them with fewer benefits.

For her part, Shona Clarkson, lead organizer with the activist campaign Gig Workers Rising, says the proposals from ride-hailing companies are “a watered-down version of what drivers have been demanding for years” and do not fulfill their other needs. Gig Workers Rising will continue to fight for drivers to be full employees, she says, adding that the $90 million campaign is evidence that “these companies are afraid.”