Uber Technologies Inc. (NYSE: UBER) said it will continue classifying its drivers as independent contractors even after the passage last week of California’s Assembly Bill 5, which puts in place the stricter “ABC” test for determining independent contractor compliance in the Golden State.
And in New York, Gov. Andrew Cuomo also wants to steer more workers away from “independent contractor” status, Crain’s New York Business reported. Cuomo said he hopes to see companies bring people onto their payroll instead of treating them as self-employed, even as he noted the trend in the opposite direction.
“I think we have to look at how we define ‘employee’ versus ‘independent contractor’ going forward, 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 told Crain’s.
And in Michigan, employers who retain independent contractors find themselves under scrutiny from Attorney General Dana Nessel’s newly established Payroll Fraud Enforcement Unit, The National Law Review reported. The unit, created in April, focuses primarily on the misclassification of employees as self-employed independent contractors. Nessel asserts that Michigan businesses “stole” and “robbed” $429 million in wages and overtime pay between 2013 and 2015.
So far, the Payroll Fraud Enforcement Unit has received nearly 100 complaints through its tip line and website. Employers who have had such a complaint filed against them are required to respond with three years of payroll data (for all staff) and answer a 43-point questionnaire.
The Uber response. Concerns had arisen that the law could make it more difficult for human cloud firms such as Uber to classify their drivers as independent contractors in the state.
“Contrary to some of the rhetoric we’ve heard, AB 5 does not automatically reclassify any rideshare drivers from independent contractors to employees,” according to a written statement by Tony West, chief legal officer at Uber. “AB 5 does not provide drivers with benefits, nor does it give drivers the right to organize. In fact, the bill currently says nothing about rideshare drivers.”
The law does insert the “ABC” test into state law, but that test has been in place since the California Supreme Court’s Dynamex decision more than a year ago, West wrote.
“Governor Newsom has already committed to sign AB5, which would go into effect in January 2020,” West wrote. “Because we continue to believe drivers are properly classified as independent, and because we’ll continue to be responsive to what the vast majority of drivers tell us they want most — flexibility — drivers will not be automatically reclassified as employees, even after January of next year.”
The company will also continue to respond to claims of misclassification through arbitration, as it does now.
Uber plans to continue efforts to negotiate a compromise agreement with the state; Uber and other human cloud firms such as Lyft Inc. (NASDAQ: LYFT) also plan to put a ballot measure before voters in California to allow voters to weigh in on the classification of drivers. Uber and Lyft have already transferred $60 million to fund the campaign.
“Importantly, our ballot measure will not ask voters to exempt us from AB 5, even though nearly every other industry in California that works with independent contractors received an exemption from the ABC test through special amendments,” West wrote. “Instead, we will ask voters to support the pro-driver policies we have advocated for: giving drivers access to benefits and an earnings floor and retaining the flexible access to on-demand work they enjoy today.”