Legislation that would narrow the definition of “independent contractor” was signed into law on Wednesday by California Governor Gavin Newsom. If upheld by the courts, the bill will force companies like Uber and Lyft to classify workers in California as “employees,” if they meet certain criteria.
The three part-test was outlined last year in a state Supreme Court opinion. Workers should be considered employees, the ruling found, if they form a core part of the company’s business, if they perform their duties as directed by management, or if they have established their own independent business.
Though many industries are exempt from the legislation, the rideshare industry is not. Uber and Lyft have campaigned against the initiative, and are contributing toward a $90 million lobbying push to annul the law through a referendum.
Both companies are claiming the legislation will hinder driver flexibility. Supporters of the initiative, which will give Uber and Lyft drivers more rights and benefits, say this mischaracterizes the impact of the law. One Los Angeles-based group called Rideshare Drivers United said flexibility claims amount to “scare tactics the companies are using to force drivers to cede their rights as employees.”