If passed, the legislation would represent a sea change for armies of service providers that use app-based platforms run by companies that have exploded in popularity and value.
“California has led the way in innovating our economy through technology, and our laws must catch up to that innovation in order to do right by the workers in this state,” said Democratic assemblywoman Lorena Gonzalez, who authored the bill.
Under federal labor law, only workers classified as employees are allowed to unionize, and state laws are generally pre-empted by the National Labor Relations Act. Independent contractors are considered small businesses, which are usually barred from colluding on prices and other issues by anti-trust law.
But Gonzalez’s law exploits an exemption in anti-trust law that allows for collective bargaining if, her office said, a state “proactively provides them a legal framework”. The bill does just that, creating the legal guidelines for groups of 10 or more independent contractors to come together and negotiate under the oversight of the state mediation and conciliation service.
Though the law – and the smartphones – are brand new, the strategy of letting small businesses band together to negotiate is not, according to Nelson Lichtenstein, a professor of labor history at the University of California Santa Barbara.
“It’s a kind of triangular bargaining that worked in the garment industry for years,” Lichtenstein said, referencing the “jobbers agreements” that arose in the 1920s. “You would have a union, then you’d have a lot of small businesses, and then you’d have the top of the supply chain, such as a department store that buys the clothing, that has the real power and money.”
Garment workers went on strike to force their direct factory employers to negotiate better prices for their garments from the department stores, resulting in higher wages for the workers, Lichtenstein explains.
Though the jobbers agreements broke down as the garment industry moved overseas, Lichtenstein sees promise in adopting the model for the on-demand economy, especially given the difficulties of organizing a union.
“If they simply said that all Uber drivers should be workers instead of independent contractors, then the drivers would be covered by the NLRA, and there are 70 years of precedent for how that works out,” he says. “Employers know how to defeat a union under the NLRA.”
Not everyone in labor is convinced that organizing independent contractors is the best route, however.
Steve Smith, a spokesman for the California Labor Federation, cautioned against accepting the premise that Uber drivers were independent contractors.
“Uber has set up its entire business model around misclassifying workers as independent contractors and that’s a huge concern for us,” he said. “We want to support the notion that they fit the very definition of being employees, which in and of itself should give them a whole host of rights, like minimum wage and workers compensation.”
The coalition of labor unions has not yet taken a position on whether it will support the bill.
But Gonzalez argues that nothing in her bill prevents on-demand economy workers from claiming to be direct employees, a question that is being litigated company by company. A class action lawsuit seeking to reclassify California Uber drivers as employees will go to trial in June.
“In almost every case [in the gig economy], I agree that the workers should be classified as employees,” Gonzalez said. “But as this makes its way through the courts, we want to provide workers the opportunity to have a voice.”
The bill is likely to face fierce opposition from businesses. The city of Seattle, which passed a similar law allowing app-based drivers to organize, was sued this month by the US Chamber of Commerce, which argues that the local legislation violates anti-trust law.
Uber declined to comment on the California bill, but the Internet Association, a trade association representing gig economy platforms and other technology companies, expressed concern.
“For millions of Americans, the sharing economy is an important safety net that offers flexible earning opportunities,” said Michael Beckerman, CEO of the Internet Association. “Independent contractors are prevalent in every industry, but this proposal unfairly targets the internet sector in a way that could hurt the very people it purports to help.”