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Legislation passed in California will likely affect business for companies like Lyft, Uber

Legislation was passed in the Democrat-led California state Assembly on Wednesday that will force companies like Uber and Lyft to declare their drivers employees, rather than independent contractors

Assemblywoman Lorena Gonzalez, D-San Diego, speaks at a rally after her measure to limit when companies can label workers as independent contractors was approved by a Senate committee, in Sacramento, Calif., Wednesday, July 10, 2019. The measure, AB5, is aimed at major employers like Uber and Lyft. The bill still needs approval by the full Senate.
Associated Press

Legislation was passed in the Democrat-led California state Assembly on Wednesday that will force companies like Uber and Lyft to declare their drivers employees, rather than independent contractors.

The bill, known as Assembly Bill 5 (or AB5), passed the state Senate vote in a 29-to-11 vote on Tuesday night and was given final approval at the state Assembly Wednesday morning with a 56-to-15 vote.

According to The New York Times, California Gov. Gavin Newsom endorsed the bill this month and he is expected to sign it into law.

Under the bill, the company must call them an employee if a company controls how a worker performs their tasks or if their work is part of the company’s regular business.

Both Lyft and Uber have been in negotiations to either change the bill or be exempt from it, saying the bill could otherwise upend their businesses, according to The Wall Street Journal.

“As employees, ride-share drivers would be entitled to benefits such as a minimum hourly wage and workers compensation,” according to The Wall Street Journal. “But the companies have argued the bill would take away much of the flexibility of drivers, who now work whenever they want and can earn more when demand jumps.”

“Today, our state’s political leadership missed an important opportunity to support the overwhelming majority of ride-share drivers who want a thoughtful solution that balances flexibility with an earnings standard and benefits,” a Lyft spokesman said. “The fact that there were more than 50 industries carved out of AB5 is very telling.”

California Sen. Maria Elena Durazo claimed that while these companies promote themselves as innovators, there is nothing innovative about companies that don’t pay Social Security or Medicare.

“Let’s be clear: there is nothing innovative about underpaying someone for their labor,” she said.

Lyft recently told its drivers they may soon be required to drive specific shifts in specific areas and only drive for a single platform.

Meanwhile, on Tuesday, Uber laid off 435 workers, which represented the company’s second major layoff spell in recent months, according to The New York Times.

The bill was introduced last December and will take effect on Jan. 1, 2020.