Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at.

Flexibility has become a totemic word for Uber and Lyft. They have regularly invoked its desirability when questioned about their decision to class drivers as independent contractors in countries including the US. A bill passed by the Californian Senate is a welcome if overdue step towards changing that.

It seems obvious that individuals driving full-time for these companies should be treated as employees and receive the benefits that classification entails. The Californian legislation should catalyse a broader effort to ensure that gig economy employers do not take advantage of workers. Digital disrupters may be right that employment law needs an update. That does not mean that drivers should suffer to boost companies’ revenue.

Assembly Bill 5 does not automatically mean that will change workers’ status from contractors to employees. Instead, it expands on a previous Californian Supreme Court decision on labour rights, making it more difficult for employers to prove workers are independent contractors. The bill follows similar legal precedent originally set in October 2016 in the UK. The ruling held that Uber needed to treat drivers as “workers”. Drivers in the country are now entitled to receive both a minimum wage and holiday pay (although not to the full benefits of an employee).

For part-time workers, the ability to choose when to work has significant appeal. For those who are working full-time, however, Assembly Bill 5 makes patent sense. By treating their workers as independent contractors, Uber and Lyft have sought to keep overheads down. Given that both are lossmakers, the commercial decision is understandable. But the effect on drivers is pernicious. It deprives them of the benefits which they would receive if classified as employees such as healthcare, paid vacation, or a minimum wage.

Attempts by the companies to paint themselves as driven by their workers’ best interests also does not wash given their ongoing work with autonomous vehicles. Back in 2014, then Uber chief executive Travis Kalanick talked of removing “the other dude in the car” to reduce costs. It is hard to believe that mentality has changed.

Uber and Lyft may be right that implementing a minimum wage would affect their service. The current system pays workers a percentage of the fare per journey. The ride-hail companies argue that forcing them to pay a minimum wage to drivers regardless of whether they are on a booked journey would lead to one of two changes: either a reduction in the numbers of drivers on the roads, affecting customers, or scheduled shifts, cutting down on drivers’ ability to start and stop.

Instituting this may need changes in employment law. Matthew Taylor’s 2017 suggestion to apply minimum wage rules on a “piece rate” basis offers one way this could be effected. Implementing these changes are also likely to translate into higher costs for consumers, as Uber and Lyft seek to limit the damage to their own bottom line. Neither of these are good arguments for maintaining the broken status quo.

Uber, Lyft and food delivery service DoorDash are putting a total of $90m towards a ballot measure for November 2020. They hope this will exempt them from reclassification and allow them to push for alternative arrangements. That not inconsiderable sum of money could instead go towards providing drivers greater benefits. The Golden State’s decision should be an example to other local and national governments. Business models which risk undermining fair employment standards should not be allowed to continue under the label of innovation.

~source