Gig Economy Companies Protest Change to California Labor Laws

A change to California labor laws that reclassifies some independent contractors as employees faces criticism from members of the growing “gig economy.” Critics include Uber, Postmates, and drivers who work for such companies on a contract basis.

California’s new law took effect on January 1, and the two companies, along with two drivers, are already moving for an injunction to block the law from being enforced. At the same time, the companies and drivers are preparing to file a lawsuit over the new law’s requirements.

According to Uber, Postmates, and the drivers, the new law violates the constitutional right to “follow a chosen profession free from unreasonable government interference.” Allegedly, the new law would unfairly harm app-based businesses that rely on contractors for their business models.

The companies and drivers claim that the law would require them to reclassify thousands of contractors as employees, per the requirements of the law. Allegedly, this change would damage businesses.

Though proponents say that the law would better protect the interest of many workers who are classified as contractors and therefore do not have benefits, Uber, Postmates, and the drivers disagree. They say that the law is actually aimed to protect special interests.

In an attempt to argue this point, Uber, Postmates, and the drivers point to the fact that the law does allow many exemptions from the law for workers in a range of industries. According to the critics, this indicates that the law is not designed to protect the interests of the public in general.

The companies and drivers argue that “there is no rhyme or reason to these nonsensical exemptions, and some are so ill-defined or entirely undefined that it is impossible to discern what they include or exclude.”

Uber has taken additional steps to challenge the law, including teaming up with competitor Lyft to possibly craft a ballot initiative that could challenge the law this year.

This is not the first attempt by businesses to block the law or mitigate its effects. The California Trucking Association also filed a lawsuit over the law, and the trucking industry has received a temporary block shielding it from the law’s requirements. The California Transportation Administration has received a similar temporary restraining order for the law. 

This is in contrast to workers who complain about independent contractor misclassification.

Labor Law Impact?

The Los Angeles Times explains that the benefits of the change to California labor laws will likely be that many independent contractors who would otherwise not receive benefits would be eligible for health insurance coverage and workers protections, among other benefits. Reportedly, the hope is that more workers would be classified as employees, though this could take time.

However, it could have negative effects on workers as well, states the Los Angeles Times. Faced with a law that requires them to give more workers benefits, employers could begin to shift some workers from full-time to part-time to avoid giving them benefits due to full-time workers. Some employers may also lay off workers to deal with the increase of costs.

Forbes explains that the change to California labor laws may inspire similar changes in other states, signaling the possibility of both further challenges for gig economy companies, and possible expanded protections for gig economy workers around the country.

The California Contractor Reclassification Lawsuit is Case No. 2:19-cv-10956, in the U.S. District Court for the Central District of California.

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