California lawmakers have hailed the bill signed by Gov. Gavin Newsom this week that could require drivers of ride-hailing companies to be labeled as employees rather than independent contractors, saying the bill could raise wages and provide new workplace benefits. But the drivers are divided about how it will affect them. For Rachel Hudson, a 43-year-old driver for Lyft Inc. who struggles with arthritis and an anxiety disorder, the bill’s passage is unwelcome. Ms. Hudson has driven for Lyft for about five years and fears employment status could mean having to work in scheduled shifts that would wipe out the flexibility she needs. “Sometimes, I need a two- to three-hour break. I can’t always be relied upon to be at work at specific times,” Ms. Hudson said. Driving for Lyft “is the only way I can afford a car. It makes a huge impact on my life.” Ms. Hudson, who lives alone in Stockton, Calif., said that besides federal disability benefits, the earnings from Lyft are her only income. Although the battle between California and ride-hailing companies has centered on what Assembly Bill 5 could do to the businesses of Uber Technologies Inc. and Lyft, the legislation also has raised concerns among drivers who value the unique job opportunities ride-hailing companies create—and the value of such services for customers. In online forums, debate has been split over the promise the bill holds versus its threat to erode a system of free agents that drivers say they enjoy. In a survey of more than 500 Uber and Lyft drivers this month, about 70% reported being “extremely” or “very” satisfied with their experience on the platform, according to RBC Capital Markets. Many drivers sign up as a side gig to other jobs. Uber said 92% of its drivers work fewer than 40 hours per week, while 45% drive fewer than 10 hours. That group includes Lisa Broyles, a 51-year-old clinic technician near Sacramento who drives for Uber during her free time to help pay for education-related costs for a nursing license she is pursuing. “We don’t want to be in debt,” Ms. Broyles said. Given California’s size and economic heft, AB5’s passage could reverberate, leading to similar rules being implemented in other states. New York already has a minimum wage law in place for “gig economy” companies, and the Taxi and Limousine Commission voted last month to extend a cap on for-hire vehicle licenses, the first rule of its kind in the country, to address worries over congestion and low driver wages. In California, Uber and Lyft will face a stricter test to prove that their drivers are independent contractors, including showing that drivers’ services are outside the companies’ usual course of business. Lyft told drivers in a message last week they “may soon be required to drive specific shifts, stick to specific areas, and drive for only a single platform,” while Uber indicated it doesn’t plan to make any immediate changes. Analysts say if Uber and Lyft’s costs increase as a result of implementing new systems and benefits, that could result in higher fares and customers could turn elsewhere for rides. Ms. Broyles said many of her trips include college students and fast-food or other low-income workers that use the service to get to work. “If they have to pay more, they won’t be able to afford it,” Ms. Broyles said. Lyft says it has 325,000 drivers in California, while Uber says it has more than 200,000. Lorena Gonzalez, the Democratic state assembly member who authored AB5, said, “There is nothing in AB5 or labor law that prevents these companies from offering flexible scheduling to employees. Flexibility is and will always be at the employer’s discretion.” Ms. Gonzalez has found support from drivers, including David Leher, a 46-year-old artist in Los Angeles, who has made driving for Uber and Lyft a full-time job. A group of Uber and Lyft drivers, many of whom came together in Sacramento to rally for AB5 during California’s legislative session, held a celebratory luncheon in Los Angeles on Wednesday when the bill was signed into law. Mr. Leher, a member of Rideshare Drivers United, said his earnings have decreased since he began driving six years ago as Uber and Lyft have tweaked wage algorithms. “We have to pay for our own gas and for our own cars—they don’t give us anything,” Mr. Leher said. “We don’t trust these platforms anymore.” Uber and Lyft over time have implemented new systems such as tipping, but many drivers continue to complain about pay. Economists estimate ride-hailing drivers earn from $9 to $16 an hour, after subtracting gas, maintenance and other related expenses. Tony West, Uber’s chief legal officer, said last week the company is confident it can prove its drivers are independent. Uber and Lyft, already facing legal challenges by drivers over pay and benefits, say they and food-delivery service DoorDash plan to spend $90 million combined on a ballot-measure campaign to alter the law. Such a campaign could increase pressure on Sacramento to reach a compromise. It isn’t clear how the bill would be enforced once it is enacted, but Gov. Newsom said the state would continue to talk with Uber and Lyft into the next legislative session, which begins in January. In previous negotiations, companies offered concessions including a proposal to implement a $21 minimum wage.


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