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Uber to keep classifying drivers as independent contractors even in California in wake of AB 5

September 12, 2019

Uber Technologies Inc. (NYSE: UBER) said it will continue classifying its drivers as independent contractors even after the passage of Assembly Bill 5 in California, which codifies into law the more-strict “ABC” test of determining independent contractor misclassification.

Concerns had arisen that the law could make it more difficult for human cloud firms such as Uber to classify their drivers as independent contractors in the state.

“Contrary to some of the rhetoric we’ve heard, AB 5 does not automatically reclassify any rideshare drivers from independent contractors to employees,” according to a written statement by Tony West, chief legal officer at Uber. “AB 5 does not provide drivers with benefits, nor does it give drivers the right to organize. In fact, the bill currently says nothing about rideshare drivers.”

The law does insert the “ABC” test into state law, but that test has been in place since the California Supreme Court’s Dynamex decision more than a year ago, West wrote.

“Governor Newsom has already committed to sign AB5, which would go into effect in January 2020,” West wrote. “Because we continue to believe drivers are properly classified as independent, and because we’ll continue to be responsive to what the vast majority of drivers tell us they want most — flexibility — drivers will not be automatically reclassified as employees, even after January of next year.”

The company will also still continue to respond to claims of misclassification through arbitration as it does now.

Uber plans to continue efforts to negotiate a compromise agreement with the state, and it and other human cloud firms such as Lyft Inc. (NASDAQ: LYFT) also plan to put a ballot measure before voters in California to allow voters to weigh in on the classification of drivers. Uber and Lyft have already transferred $60 million to fund the campaign.

“Importantly, our ballot measure will not ask voters to exempt us from AB5, even though nearly every other industry in California that works with independent contractors received an exemption from the ABC test through special amendments,” West wrote. “Instead, we will ask voters to support the pro-driver policies we have advocated for: giving drivers access to benefits and an earnings floor and retaining the flexible access to on-demand work they enjoy today.”

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