Uber says drivers aren’t part of its ‘usual course’ of business
California lawmakers passed a landmark bill on Wednesday that threatens to reshape how companies like Uber and Lyft do business. The legislation, known as Assembly Bill 5 (AB5), was passed in the state Assembly and now heads to Democratic California Gov. Gavin Newsom’s desk.
Shares of Lyft climbed 2.3% on Wednesday afternoon, while Uber was up 1.4%.
AB5 would require gig economy workers to be reclassified as employees instead of contractors. The bill passed in the state Assembly in a 61-16 vote, Assemblywoman Lorena Gonzalez (D-San Diego), the bill’s author, said in a statement. That’s after the bill passed in the state Senate on Tuesday.
Uber and Lyft maintain that AB5 won’t immediately change independent contractors into employees. Tony West, Uber’s chief legal officer, said on a call with reporters that the bill builds on legal tests already established in California around how drivers should be classified. West said drivers may not necessarily fall under the new rules laid out in AB5.
“Under that three-part test, arguably the highest bar is that a company must prove that contractors are doing work ‘outside the usual course’ of its business,” West said. “Several previous rulings have found that drivers’ work is outside the usual course of Uber’s business, which is serving as a technology platform for several different types of digital marketplaces.”
West said Uber intends to follow AB5 should it be put into law next year, but that it will continue to try to prove that it doesn’t fall under its legal framework. He warned there could be some costs to the company’s business should Uber unsuccessfully challenge AB5.
“Uber is no stranger to legal battles, that’s for sure,” West said. “We operate in a very regulated environment, and we recognize that there will be legal challenges on all fronts much of the time.”