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The emergence of the Gig Economy has allowed millions of Americans to earn additional money without the constraints of rigid work schedules. However, the flexibility allotted to contractors through ride-sharing and food delivery services is under threat in California. Back in 2019, the California legislature passed Assembly Bill 5 (AB-5) that would classify many freelance workers as “… workers bona fide employees, with schedules and hours determined by the company rather than the worker..” (p.4). The California courts apply AB-5 under the three-prong test developed in Dynamex Operations v. Superior Court to distinguish contractors from full employees; after AB-2257 passed in 2020, “..109 categories of workers were exempted from AB-5..” (p.7). In response to AB-5, delivery and ride-sharing platforms collectively generated Proposition 22 to exempt these services from the law (p.7). Unfortunately, the law was ruled as unconstitutional 2021; per the Los Angeles Times:

That’s in part because the law, Roesch wrote, infringes on the power of the Legislature explicitly granted by the state Constitution to regulate compensation for workers’ injuries.

 Hector Castellanos, et al. v. State of California, et al.

Amid all the AB-5 turmoil, one question emerges, who benefits from labeling gig workers as full-employees? It certainly isn’t the Uber driver. Considering, 80% of surveyed independent contractors “…reported having done some sort of independent contracting gig in the last year said that it was a part-time occupation…” (p.6). Also, most gig workers have insurance benefits either from their primary job or spouse (p.5) and prefer the flexibility over fringe benefits that “…bear opportunity costs in the form of foregone income they could have received if not for the benefits.” (p.6).

When viewed through the lens of Bootleggers and Baptist (1983), it is clear that few economic agents are hiding within the smokescreen of the workers’ rights coalition. The irony is, the demographic that AB-5 is designed to “help’, vehemently opposed the legislation. It can be assumed that the California legislature is a Dual-Role Actor in this coalition. Why? State lawmakers most likely passed this law as a worker protection provision for gig economy employees. However, Judge Roesch’s admission that excluding gig workers interferes with the authority of the legislature. Lawmakers are also Bootleggers for having an invested interest in not relinquishing political power.

 One notable economic agent on the bootlegger side of the coalition would be labor unions. Some readers may wonder why labor unions would not be considered a Baptist or even a Dual-Role Actor. Unions are heavily involved in the political process (p.410), theoretically could be perceived more as political interest groups than employee protection organizations. Arguably, these organizations do little to advance the interests of workers. Labor unions within the state of California had angled to organize ride-share drivers, “…contributing to the pressure on legislators to make a change..”(p.7). Various labor unions throughout California have expressed that AB-5 would reduce the exploitation of contract employees. However, they benefit from this legislative victory because it reinforces their political currency as an interest group. One union that stands to gain the most from reclassifying Uber drivers are taxicab unions. It is well known that the taxicab industry has struggled to compete with the convenience and lower rates of ride-sharing apps. The state of Nevada has placed restrictions on platforms offering ride-sharing services. Uber has faced many regulatory barriers often supported by taxi drivers (p.191); most notably “medallion systems” where governments issue a limited number of licenses to operate as a driver (p.574). Classifying Uber drivers as full-employees would make employing contractors more costly and onerous, thereby disturbing Uber’s operations. All of this to shield taxi drivers from the Schumpeterian gales of creative destruction.

2 thoughts on “Bootleggers & Baptists XXXIX- AB-5 and Uber

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