ALBANY — When is a worker not an employee?
California passed a measure last week to respond to that complex question confronting the burgeoning gig economy, which includes ride-hailing companies such as Uber and Lyft as well as other at-call services that depend on independent contractors. And New York officials plan to be next to reshape the work world on a scale that one veteran lawmaker said would be similar to sweeping changes made during the Industrial Revolution to protect workers.
California’s legislation — which would take effect Jan. 1 if signed by Gov. Gavin Newsom — doesn’t reclassify the workers at these app-based companies, including DoorDash and Postmates, as employees. But it would make it much harder for companies to prove the people who work for them are independent contractors rather than employees entitled to a minimum wage, benefits and job protections of traditional workers.
Such measures could affect thousands of workers who are now independent drivers, including truck drivers, construction workers, piecework laborers, janitors, commercial fishermen, entertainers and deliverers of newspapers. In California, several jobs are exempted from the bill or some of its requirements, including hair stylists, barbers and some salespeople working on commission.
The California legislation defines an employee based on a U.S. Supreme Court decision last year, which created a test that, in part, states that independent contractors can’t be controlled and directed by the companies.
Gov. Andrew M. Cuomo said California’s action on the progressive goal got his attention and “gets my competitive juices flowing.”
“I have proposed in the past and I will propose in the future, more protections for workers,” Cuomo said last week. “And part of that is redefining a worker as an employee, as opposed to an independent contractor.”
The Senate had already planned a public hearing for Oct. 16 in Manhattan before the California legislature acted. Key New York lawmakers began preparing research for similar legislation at the end of the last legislative session, which ended in June.
“The industry went crazy,” said Sen. Diane Savino (D-Staten Island), chairwoman of the Senate Internet and Technology Committee, referring to ride-sharing companies.
“Since then, California has gone forward, but we’re going to have to be even stronger than California,” Savino said. “We are going to examine the issues and take testimony from everyone who is effected, whether its ride-sharing or delivery service, as well as the effects of robots and artificial intelligence on the work force … the work world is changing and we’re going to have to figure out how to adapt our labor laws and protect workers.”
For companies, hiring independent contractors means they don’t have to provide benefits, adhere to many work rules such as overtime pay owed to traditional hourly workers, and don’t have to face unionization by employees. The employers argue a change in workers’ status could hinder the growth of the app-based transportation industry, which includes delivery of food and other internet-based services. Independent contractors turned into employees could face fixed hourly pay — which could be lower than what they earn now — fixed shifts and likely far fewer jobs, the companies said.
For consumers, requiring employers to treat the drivers as direct employees will likely result in higher fares, longer wait times and potentially less service in low-income areas because the profit incentive would diminish for a driver with a fixed work period, the companies said.
Ride-hailing companies are seeking compromise “that balances flexibility with an earnings standard and benefits,” said Adrian Durbin, senior director of communications of Lyft in California.
Companies also say they will fight reclassification of workers in court, while they prepare to force a public referendum to counter the measure.
“Today, drivers have control over when, where, and how they work,” said Tony West, senior vice president of Uber. “They can choose to work for any of our competitors at the same time, and many do,”
“In the U.S., 92 percent of drivers drive less than 40 hours per week, and 45 percent of drivers drive less than 10 hours per week,” West said. “This would all change dramatically if they were employees. We will continue to defend the innovation that makes that kind of choice, flexibility, and independence a reality.”
Organized labor, which is closely allied with the New York State Legislature, strongly supports the California effort.
“Building on the historic success of our brothers and sisters in California, here in New York State we will not rest until app workers are afforded the same rights as other hardworking men and women, including the ability to join together to form a union,” said Mario Cilento, president of the New York State AFL-CIO.
Savino said the Oct. 16 hearing will lead to legislation.
Already pending in the Legislature are several related bills. A bill by Sen. Liz Krueger (D-Manhattan) would create a task force to “examine the nature of newly created jobs and economic sectors in the 21st century, including on-demand employment and jobs related to or created by electronic application marketplaces, review existing laws and regulations as they pertain to employers, employees and the new economy, assess state laws on collective bargaining in the private sector, and whether the public relations board … can and should exercise jurisdiction over workers in new economic sectors.”
A pending bill sponsored by Assemb. Harry Bronson (D-Rochester) would direct the state Labor Department to protect independent contractors and “afford them the same compensation guarantees as traditional employees.”
Another bill sponsored by Sen. Robert Jackson (D-Washington Heights) would more narrowly define an independent contractor and anyone not meeting that criteria “shall be considered an employee rather than an independent contractor.”
These and other measures are expected to be part of the 2020 legislative session beginning Jan. 1. The Senate’s Republican caucus had opposed many of these measures as a drag on business growth and employment, but the GOP lost majority control in the 2018 elections. A Republican spokesman had no comment on the California bill or the effort in Albany.
Krueger, a progressive veteran in the chamber’s Democratic majority, said new laws to fit the gig economy are essential and certain in New York. She calls it a “gig revolution.” She likens it to the Industrial Revolution over a century ago in which government had to step in to end child labor in factories, reduce work hours and create living wages, benefits and safety measures for a new wave of employment.
“The gig economy or gig revolution does require us to review our laws when it comes to worker rights and protections,” she said. “There is no question.”