Welcome
Daily Labor Report®

New York Said to Become Next Battleground for Gig Worker Law

Oct. 9, 2019, 2:28 PM

The debate over gig worker rights could soon move east, as lawmakers in New York consider following California in making it harder for companies like Uber Technologies Inc. and Lyft Inc. to classify drivers as independent contractors.

Sen. Diane Savino (D) plans to introduce updated legislation that would extend protections such as unemployment insurance, workers’ compensation benefits, and minimum wage and overtime pay requirements to a new class of “dependent workers.” But a coalition of advocates already is pushing lawmakers to go further, adopting something similar to a new California law designed to force gig and a wide range of other businesses to reclassify independent contractors as employees.

“I think the core of our position has always been that the laws have to be universal, they have to protect and raise the standards for workers across the economy,” Bhairavi Desai, who runs the New York Taxi Workers Alliance, told Bloomberg Law. The alliance launched the coalition with Service Employees International Union 32BJ and the National Employment Law Project. “I think the role that people like us are going to play is to make sure that the gig companies don’t lobby to water down these laws or to win a carveout for themselves.”

The legislative push comes as Uber, Lyft, and other gig companies are under fire for their business model, treating workers connected to customers through online platforms as self-employed entrepreneurs. Those workers aren’t covered by a spectrum of employment laws and are on the hook for payroll taxes usually picked up by employers.

Discussions in New York signal that the closely watched California law to crack down on that practice could be spreading. That type of legislation is likely to bring court battles and a lobbying blitz.

“It’s not a question whether or not there will be worker classification legislation in New York,” says Bradley Tusk, a consultant who’s advised Uber and Handy, among other companies. “It’s a question of what will be in it.”

Tusk managed the last mayoral campaign of Michael Bloomberg, majority owner of Bloomberg Law’s parent company.

Cuomo Wants Bill

California Gov. Gavin Newsom (D) recently signed into law Assembly Bill 5, despite heavy opposition from gig economy companies like Uber, Lyft, DoorDash, and Instacart, and the larger business community. Critics of that law, which makes it much harder to classify workers as independent contractors, say it will gut a wide variety of businesses and bump up their tax bills.

“A.B. 5 is huge, both in terms of the change in the law but also the scope,” said Adam Abrahms, a California attorney for Epstein Becker who represents businesses in labor relations cases. “It will take years for us to really understand this. There will be lots of litigation, lots of consternation, and probably some industry leaving California.”

Uber and Lyft’s costs per driver could jump by more than 20% if they have to reclassify workers as employees, according to a Bloomberg Intelligence analysis.

New York Gov. Andrew M. Cuomo (D), at an unrelated event on Sept. 9 said the state could follow California’s lead, stressing the need to extend various legal protections to workers by redefining independent contractors as employees.

“And I think in my opinion, forget the specifics, more people should be considered employees because what has been happening is companies have been going out of their way to hire independent contractors to get out of those obligations,” he said.

Cuomo’s office didn’t respond to a request for more details.

The state Senate’s internet and technology committee will host an Oct. 16 public hearing on the “gig economy” in New York City to hear from stakeholders.

Assemblyman Marcos Crespo (D) and Savino, the committee’s chairwoman, introduced a bill (S.6538/A.8343) in June that would have created a new “dependent worker” classification and required the state labor department to study potentially giving those workers certain rights. The tag would have covered workers who provide personal services to a consumer through a private third party, which establishes the amount the workers earn, or is charged or collected from the consumer.

The dependent worker category was floated in 2016 by former Obama Labor Department official Seth Harris and Princeton University economist Alan Krueger. Supporters tout it as a middle-ground approach that allows gig workers to get some benefits and protections, while giving them the flexibility to set their own hours and shielding gig companies from certain tax and other liabilities. Critics are concerned that it will let companies off the hook for important responsibilities to their workers.

The bill, which stalled before the legislative session ended in June, wouldn’t have automatically extended new protections to “dependent workers.” Instead, it would have directed the state Labor Department to study the possible impact of extending a variety of protections, such as the right to unionize, strike, and demand minimum wages and overtime pay.

Savino, the bill’s sponsor, said the initial bill will “probably not be the right one for New York either” this time around because the new legislation should go beyond simply studying the issue.

Hearing Renews Talks

The Oct. 16 committee hearing will allow lawmakers to take another look at the issue, Savino said, and gather more information as they craft new legislation for the upcoming 2020 session, which begins in January. There could be more hearings to come on the topic, she said.

The worker group coalition hasn’t yet met with Savino, but she said she hopes they’ll take part in the conversation. The goal is to “begin to gather information, hear from all sides, and to begin to put together a comprehensive piece of legislation,” Savino said. “I know what the problems are. What we don’t have yet is the solutions, and I think that’s part of what the hearing is about.”

Representatives for SEIU 32BJ and the National Employment Law Project declined to comment. Uber didn’t respond to requests for comment.

Shortly before Newsom signed A.B. 5 into law in California, gig employers offered a compromise deal. They said they would ensure certain minimum earnings for drivers, commit to sector-wide bargaining, and provide some benefits in exchange for continuing to treat drivers as contractors. Lyft spokesman CJ Macklin told Bloomberg Law the company is likely to take a similar approach in New York.

“I think in broad strokes we are supportive of some kind of solution that provides a certain level of protection for drivers while maintaining the flexibility that we know they are seeking,” Macklin said.

Savino said New York’s in a different position than California, where a state Supreme Court ruling spurred support for the law. The court last year adopted the “ABC” legal test for worker classification, which makes it significantly more difficult to classify workers as independent contractors. A.B. 5 codified the decision in state law. The worker advocate coalition wants New York to follow suit.

New York has a “fresh landscape,” Savino said. “I think we’re in a better position to come up with what I hope to be a clear definition of what employees are and what independent contractors are.”

Still, lobbyists on both sides of the aisle already are gearing up for a fight in Albany over legislation that could eventually be tucked into an end of the year omnibus bill commonly known as the “big ugly.” That includes wrangling over possible carve outs for certain industries, debates over which protections should be extended to gig workers, and whether some of those protections can be extended to contractors without making them traditional employees.

“When Uber and Lyft came into town with this business model, we were the first to recognize that this is actual employment,” said Desai from the Taxi Workers Alliance. “We knew that it was just a matter of time that the law was going to catch up with them.”

To contact the reporters on this story: Chris Opfer in New York at copfer@bloomberglaw.com; Keshia Clukey in Albany, N.Y. at kclukey@bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com