Biden Backs Assembly Bill 5; Opposes Measure to Exempt App-Based Drivers

Sacramento, CAPresumptive Democratic presidential nominee, Joe Biden, has announced that he opposes a November 3 ballot initiative that would permit companies like Uber and DoorDash to continue to classify drivers as independent contractors. If approved, the measure would override AB 5 with respect to app-based drivers. These drivers could, as a result, be classified as independent contractors not protected by the wage and hour provisions of the California Labor Code.  

The usual partisan churn has ensued. The larger story is that app-based businesses have sought to limit the impact of Dynamex Operations West, Inc. v. Superior Court, especially since the California Supreme Court’s decision in the lawsuit was codified effective January 1, 2020. Requiring app-based businesses to classify drivers as employees (and thus more expensive to the company than independent contractors) has been described as an “existential threat” to the business model on which Uber and Lyft depend.

Biden’s opposition to ballot initiative no surprise

Biden’s support for AB 5 was widely anticipated. His support for organized labor is well-known, and he was endorsed by the AFL-CIO, the country’s largest coalition of labor unions in late May. The California labor movement has mobilized to fight efforts to limit or repeal the law.

November 3 ballot initiative targeted at drivers

The initiative that will appear on the November 3 ballot would amend AB 5 in the way that it applies to app-based drivers. The law, as amended, would deem these drivers to be independent contractors and not employees or agents. The three-part test used to determine employee status would simply not apply to this subset of workers.

The initiative would define app-based drivers as workers who:

• provide delivery services on an on-demand basis through a business’s online-enabled application or platform; or
• use a personal vehicle to provide prearranged transportation services for compensation via a business’s online-enabled application or platform

Examples of companies that hire app-based drivers include Uber, Lyft, and DoorDash.

Contrary to some of the clamor surrounding the issue, the ballot measure would not affect how AB 5 applies to other types of workers. To be clear, the initiative would not affect the legal status of freelance journalists, photographers, graphic artists, French tutors or babysitters. Those and all other gig workers would continue to be covered by AB 5.

What AB 5 does

AB 5 codifies the three-part test (sometimes called the “ABC test”) for determining whether a worker is an employee or an independent contractor and was set out by the California Supreme Court in Dynamex. California labor law, as modified by AB 5, now presumes that a worker is an employee unless all three of the following conditions are met:

• The person 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; and
• The person performs work that is outside the usual course of the hiring entity’s business; and
• The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

If an individual satisfies all three criteria, then he or she may legitimately be treated as an independent contractor. The freelance photographer who produces a portrait photograph of the esteemed founder of a chair factory may, in fact, be an independent contractor. That person may reasonably be presumed to be able to negotiate the terms of a contract that governs compensation and other working conditions, and thus in relatively little need of the wage and hour protections of California labor law.

The problem, of course, is for workers who have no ability to negotiate and whose employment otherwise resembles part-time, flexible employment.  The situation of an Uber driver or a DoorDash Dasher is less likely to satisfy all three criteria, especially the second element. These are the workers AB 5 is designed to protect.

Policy choices

The reasons that the California legislature cites in embracing the Dynamex test make the policy choices behind the amendment clear. They are:

“to ensure workers who are currently exploited by being misclassified as independent contractors instead of recognized as employees have the basic rights and protections they deserve under the law, including a minimum wage, workers’ compensation if they are injured on the job, unemployment insurance, paid sick leave, and paid family leave… [and to] restore[s] these important protections to potentially several million workers who have been denied these basic workplace rights that all employees are entitled to under the law.”

These are large social goals related to reducing poverty and preventing further erosion of the middle class. A blizzard of advertising about “protecting freedom” notwithstanding, the limits of the November 3 ballot initiative also speak volumes about the policy objectives behind the effort.

It’s about protecting a few large app-based companies – Uber, Lyft, DoorDash to name a few – from an existential threat. This is an attempt to protect their business model, through company-specific lawmaking – nothing more.