LOS ANGELES (CBSLA/CNN) — The California State Senate passed a landmark bill Tuesday that could impact nearly one million workers who use phone apps to book or perform their jobs.
Assembly Bill 5 would force companies like Uber and Lyft to treat its current workforce of independent contractors as employees, entitling them to benefits including sick time, vacation, medical benefits and overtime.
Tech companies previously warned the law could ruin their businesses and fought hard against it.
Uber, Lyft and DoorDash announced back in August that they would pay $30 million each to fund an initiative campaign for the California ballot that would create the new gig worker category.
Governor Gavin Newsom has promised to sign the bill into law. If signed, it will go into effect Jan. 1.
The senate passed the legislation late Tuesday down party lines by a margin of 29-11. AB-5 still needs to return to the assembly — which already passed in back in May — to approve new amendments that were brought in the senate. That vote is expected to take place by the close of the legislative session this week.
The law would change California employment practices by making it more difficult for employers in the state to treat their workers as independent contractors. Those "gig economy" workers don't enjoy many of the rights employees do, such as a minimum wage, overtime pay, workers' compensation, unemployment insurance and paid sick leave. Independent contractors also pay their own expenses.
Drivers have been fighting for better treatment for several years. In May, drivers in a dozen cities around the world went on strike, pushing for better pay and improved working conditions.
Many online labor platforms have said they consider the independent contractor relationship key to their business model. Providing benefits and rights to which an employee would be entitled can be costly. The companies say independent contractor status gives drivers the freedom to set their own schedules and work for multiple companies at the same time.
Lyft indicated in a response that they are ready to fight back against the legislation. Adrian Durbin, senior director of communications for the company said the state "missed an important opportunity to support the overwhelming majority of rideshare drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits."
"We are fully prepared to take this issue to the voters of California to preserve the freedom and access drivers and riders want and need," Durbin said.
Companies opposed to the bill waged a very public and well-funded campaign to prevent its passage.
In June, the the CEO of Uber, Dara Khosrowshahi, and the cofounders of Lyft, Logan Green and John Zimmer, wrote an op-ed in the San Francisco Chronicle arguing that being required to classify drivers as employees instead of independent contractors would "pose a risk to their businesses" and ignored two important points.
"First, most drivers prefer freedom and flexibility to the forced schedules and rigid hourly shifts of traditional employment," Khosrowshahi wrote. "And second, many drivers are supplementing income from other work."
California has pushed back on the growth of the gig economy before. In 2018, the California Supreme Court changed the requirements companies must use to label their workers as independent contractors.
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