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California Passes Landmark Bill to Remake Gig Economy

SACRAMENTO — California legislators approved a landmark bill on Tuesday that requires companies like Uber and Lyft to treat contract workers as employees, a move that could reshape the gig economy and that adds fuel to a yearslong debate over whether the nature of work has become too insecure.

The bill passed in a 29 to 11 vote in the State Senate and will apply to app-based companies, despite their efforts to negotiate an exemption. California’s governor, Gavin Newsom, endorsed the bill this month and is expected to sign it. Under the measure, which would go into effect Jan. 1, workers must be designated as employees instead of contractors if a company exerts control over how they perform their tasks or if their work is part of a company’s regular business.

The legislation will affect at least one million workers in California who have been on the receiving end of a decades-long trend of outsourcing and franchising work, making employer-worker relationships more arm’s-length. Many people have been pushed into contractor status with no access to basic protections like a minimum wage and unemployment insurance. Ride-hailing drivers, food-delivery couriers, janitors, nail salon workers, construction workers and franchise owners could now all be reclassified as employees.

But the bill’s passage threatens gig economy companies like Uber and Lyft. The ride-hailing firms — along with app-based services that offer food delivery, home repairs and dog-walking services — have built their businesses on inexpensive, independent labor. Uber and Lyft, which have hundreds of thousands of drivers in California, have said contract work provides people with flexibility. They have warned that recognizing drivers as employees could destroy their businesses.

The bill, which codifies and extends a 2018 California Supreme Court ruling, may influence other states. A coalition of labor groups is pushing similar legislation in New York, and bills in Washington State and Oregon that were similar to California’s but failed to advance could see renewed momentum. New York City passed a minimum wage for ride-hailing drivers last year but did not try to make them employees.

“It will have major reverberations around the country,” said David Weil, a top Labor Department official during the Obama administration and the author of a book on the so-called fissuring of the workplace. He argued that the bill could set a new bar for worker protections and force business owners to rethink their reliance on contractors.

“It’s particularly critical because of the impact it’s going to have on the development of other business models,” Mr. Weil said.

California legislators said the bill, known as Assembly Bill 5 and proposed by State Assemblywoman Lorena Gonzalez, a Democrat, would set the tone for the future of work.

“Today the so-called gig companies present themselves as the innovative future of tomorrow, a future where companies don’t pay Social Security or Medicare,” said State Senator Maria Elena Durazo, a Democrat. “Let’s be clear: there is nothing innovative about underpaying someone for their labor.”

She added, ”Today we are determining the future of the California economy.”

Gig-type work has been under the spotlight for years as companies like Uber, Lyft and DoorDash in the United States — as well as Didi Chuxing in China and Ola in India — have grown into behemoths even as the contractors they relied on did not receive the benefits or minimum pay guaranteed to employees. Many of the companies have worked assiduously to beat back efforts to classify their workers as employees, settling class-action lawsuits from drivers and securing exemptions from rules that might have threatened the drivers’ freelancer status.

While regulators in California and at least three other states — New York, Alaska and Oregon — had found that ride-hailing drivers were employees under state laws for narrow purposes, like eligibility for unemployment insurance, those findings could be overridden by state laws explicitly deeming the drivers as contractors. About half the states in the nation had passed such provisions.

But more recently, the tide began changing. Two federal proposals introduced since 2018 have sought to redefine the way workers are classified to allow more of them to unionize. Those proposals have received support from candidates for the Democratic presidential nomination, including Senators Kamala Harris, Bernie Sanders and Elizabeth Warren. The presidential hopefuls also lent their endorsement to the California bill.

In Britain, Uber has appealed a decision by a labor tribunal that drivers must be classified as workers entitled to minimum wage and vacation. The country’s Supreme Court is expected to hear arguments in the case next year.

“Some form of benefits to some population of drivers seems inevitable,” said Lloyd Walmsley, an equity research analyst at Deutsche Bank who follows the ride-hailing industry.

A critical question is how gig economy companies will react to California’s new law. Industry officials have estimated that having to rely on employees rather than contractors raises costs by 20 to 30 percent.

Uber and Lyft have repeatedly warned that they will have to start scheduling drivers in advance if they are employees, reducing drivers’ ability to work when and where they want.

Experts said that there is nothing in the bill that requires employees to work set shifts, and that Uber and Lyft are legally entitled to continue allowing drivers to make their own scheduling decisions.

In practice, Uber and Lyft might choose to limit the number of drivers who can work during slow hours or in less busy markets, where drivers may not generate enough in fares to justify their payroll costs as employees. That could lead to a reduced need for drivers over all.

But Veena Dubal, a professor at the University of California Hastings College of the Law, said it would still generally be advantageous for Uber and Lyft to rely on incentives like bonus pay to ensure they had enough drivers on the road to adjust to customer demand much more nimbly than if they scheduled drivers in advance.

“It doesn’t make sense for them” to drastically limit flexibility, she said.

Some of the companies are not done fighting the bill. Uber, Lyft and DoorDash have pledged to spend $90 million to support a ballot initiative that would essentially exempt them from the legislation. Uber has also said it will litigate misclassification claims from drivers in arbitration and press lawmakers to consider a separate bill that could exempt them from A.B. 5’s impact when the legislative session begins in January.

California cities will have ways to enforce the new law. In last-minute amendments to the measure, legislators gave large cities the right to sue companies that don’t comply.

The bill was not universally supported by drivers. Some opposed it because they worried it would make it hard to keep a flexible schedule. After Uber and Lyft sent messages to drivers and riders in California in August asking them to contact legislators on the companies’ behalf, legislative aides said they had noticed a spike in calls.

As the bill wound its way through the Legislature, the ride-hailing companies sought an agreement that would create a new category of workers between contractor and employee. They met with labor groups and Governor Newsom’s office to negotiate a deal to give drivers a minimum wage and the right to organize, while stopping short of classifying them as employees.

But in July and August, labor groups balked, and the proposed deal disintegrated. Some company officials have expressed cautious optimism in recent days about striking a deal with labor after the bill’s passage.


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California Rent Control Bill Advances, Fueled by Housing Crisis

California’s escalating housing costs have yielded epic commutes and a rising tide of homelessness. Now they are close to producing a political milestone: a vast expansion of tenant-protection laws that would cap rents statewide.

On Tuesday, the State Senate voted to advance a bill to limit rent increases to 5 percent a year plus a cost-of-living adjustment. The State Assembly, the Legislature’s lower house, could give final approval as early as Wednesday, though passage is uncertain.

The legislation is the latest in a series of measures that have swept through state and local governments this year to regulate rents and strengthen tenant rights. For decades, such provisions have been mostly limited to a relative handful of apartments in the nation’s big cities.

“Passing tenant legislation in Sacramento is incredibly difficult,” said Assemblyman David Chiu, a San Francisco Democrat who is the bill’s author. “But we’re in the midst of the worst housing crisis in our state’s history, and I think my colleagues and policymakers understand we have to do something differently.”

The signs of that crisis include the nation’s steepest home prices and the highest state poverty rate once housing costs are figured in. In recent years, state and local governments have allocated several billion dollars to encourage subsidized affordable housing, only to see California’s homeless ranks swell.

CreditRich Pedroncelli/Associated Press

All this has opened the door for rent control, historically a lost cause in Sacramento but a legislative priority of Gov. Gavin Newsom in his first year in office. Mr. Newsom, a Democrat, was previously mayor of San Francisco, where the housing pinch has been particularly acute.

The bill is technically an anti-gouging measure that borrows language from the typically short-term price caps imposed after disasters like fires and floods. It would extend price protections to an estimated eight million tenants, though only a small fraction now face annual rent increases in excess of the bill’s limit.

“California is at the doorstep of enacting strong, statewide renter protections — safeguards that are critical to combating our state’s housing and cost-of-living crisis,” Mr. Newsom said after the Senate vote.

Normally a leader in progressive politics, California is something of a follower in this case. Earlier this year, Oregon limited rent increases for most tenants to 7 percent annually plus inflation. In New York, state lawmakers significantly strengthened regulations that dictate the rents of almost half of New York City’s rental stock and allowed other cities to impose their own rent caps.

Most states have laws that explicitly ban rent control, a century-old mechanism that has divided tenant activists, who argue that it is the most cost-effective way to quickly curb housing costs, and economists, who largely agree that it constrains the long-term housing supply. Only four states — California, Maryland, New Jersey and New York — have localities with rent control, along with Washington, D.C.

But the idea of rent control is gaining steam, fueled by a far-reaching network of tenant unions and others organizing efforts to combat displacement and skyrocketing rents.

Washington, Colorado, Illinois and Florida are among the growing number of states where lawmakers are considering rent-control legislation.

“It’s a way to confront the gentrification seeping across the country,” said Kamau Walton, a national organizer at the Right to the City Alliance, a national coalition that supports universal rent control. “Even in smaller towns, gentrification is definitely becoming an issue. And rent control is one of the ways people are pushing back.”

California legislators have considered many bills in recent years to tackle the housing crisis, to little effect. A measure making it easier to build multiple-unit housing near transit was shelved in its final committee hearing this year, while a handful of tenant-friendly bills were similarly waylaid. Mr. Chiu’s bill was the lone survivor, and backers have called its main provision a “rent cap” in hopes of improving its prospects and distinguishing it from more restrictive varieties of rent control.

Rent control, in some form, has long existed in several California cities, including Los Angeles and San Francisco. But under a 1995 state law, local governments have been prohibited from regulating the rent on vacant units, single-family homes and apartments built after that year.

Tenants’ rights groups have been pushing city-by-city ballot initiatives to extend rent control on pre-1995 housing. Those efforts have had mixed success, facing well-financed opposition from the California Apartment Association, which represents landlords.

Mr. Chiu’s bill aims to sidestep the 1995 law, which restricts only local governments, and apply rent regulations statewide. The bill exempts buildings older than 15 years, but on a rolling basis, steadily expanding the price-regulated housing stock.


CreditJim Wilson/The New York Times

In its initial draft, the bill covered every rental unit in the state, apartments and single-family homes alike. Then it was winnowed to a proposal that exempted most single-family homes and expired in three years. The rent cap was set at 7 percent plus inflation.

But after leaving the Assembly, the bill was beefed up, requiring landlords to cite “just cause” for any eviction. And Mr. Newsom got involved, brokering a deal in which the rent cap was lowered to 5 percent after inflation and its term expanded to a decade.

Landlords’ groups were initially the bill’s fiercest opponents but are now neutral, while the California Association of Realtors, whose support helped get the bill out of the Assembly, is fighting the latest version.

The shift by landlords was a strategic move. Last year California voters rejected a ballot initiative that would have allowed cities to expand rent-control policies, and the initiative’s financial backer, the Los Angeles-based AIDS Healthcare Foundation, is collecting signatures for a 2020 ballot measure.

Facing the possibility of another initiative fight, and a governor and a Legislature pressing to bolster tenants’ rights, landlords chose to influence what is passed rather than fight the tide.

“We’re not happy about this, but it’s as workable as it can be,” said Tom Bannon, chief executive of the California Apartment Association.


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Share of Americans With Health Insurance Declined in 2018

Fewer Americans are living in poverty but, for the first time in years, more of them lack health insurance.

About 27.5 million people, or 8.5 percent of the population, lacked health insurance for all of 2018, up from 7.9 percent the year before, the Census Bureau reported Tuesday. It was the first increase since the Affordable Care Act took full effect in 2014, and experts said it was at least partly the result of the Trump administration’s efforts to undermine that law.

The growth in the ranks of the uninsured was particularly striking because the economy was doing well. The same report showed the share of Americans living in poverty fell to 11.8 percent, the lowest level since 2001. Median household income was $63,200, essentially unchanged from a year earlier after adjusting for inflation, but significantly above where it was during the Great Recession.

“In a period of continued economic growth, continued job growth, you would certainly hope that you wouldn’t be going backwards when it comes to insurance coverage,” said Sharon Parrott, senior vice president at the liberal Center on Budget and Policy Priorities.

But there was good news in the Census Bureau report for the White House. The decade-long recovery is at last delivering income gains to middle-class and low-income families. After decades of rising inequality, recent wage gains have been strongest for people at the bottom of the earnings ladder, said Michael R. Strain, an economist at the conservative American Enterprise Institute.

“You’re seeing improvements in employment outcomes for people with disabilities. You’re seeing improvements in employment outcomes for the formerly incarcerated,” Mr. Strain said. “These workers who are potentially more vulnerable, you’re seeing the recovery reach them.”

Democrats, however, are likely to highlight evidence that income gains have slowed since President Barack Obama’s final years in office. Median income grew 5.1 percent in 2015 and 3.1 percent in 2016.

And while Tuesday’s report showed the benefits of what now ranks as the longest economic expansion on record, it also showed the limitations of that growth. Median household income is only modestly higher now than when the recession began in late 2007 and is essentially unchanged since the dot-com bubble burst in 2000.

Democrats and Republicans alike have tapped into the sense among many voters that the economy is not working for them.

“It’s two solid economic cycles of struggling to either stay in place or get back out of a hole,” said Arloc Sherman, a senior fellow at the Center on Budget and Policy Priorities. “You can see why people would be impatient for real progress.”


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California Labor Bill, Near Passage, Is Blow to Uber and Lyft

SACRAMENTO — A pack of Teamsters fanned out through California’s Capitol building last week, marching into legislators’ offices and pressing them to pass a bill that would force Uber and Lyft to treat their drivers as employees. The measure, Assembly Bill 5, would entitle gig workers to protections like a minimum wage and unemployment benefits. “Yes on A.B. 5! Yes on A.B. 5!” they chorused.

The push was one of several door-knocking campaigns coordinated by labor groups that can now taste success after battling the ride-hailing companies for years.

The bill is intended to codify and extend a 2018 California Supreme Court ruling that put forth a new test for classifying workers. Under that test, workers are far more likely to be deemed employees if they perform a function central to a company’s business.

Legislators are expected to pass the bill before their session ends this week, presenting the strongest challenge yet to Uber and Lyft’s business model, which relies on a corps of drivers who can be enlisted and deployed essentially as freelancers.

The measure could affect millions of Californians beyond ride-hail drivers, including janitors, nail salon workers and cable-television installers. And it would give momentum to an emerging consensus on the center-left that workers are entitled to a basic level of economic security that many Americans now live without. Several candidates for the Democratic presidential nomination have endorsed the bill, including Bernie Sanders, Elizabeth Warren, Kamala Harris and Pete Buttigieg.

“It’s hugely important because California is the birthplace and the center of app-based work, and because California has traditionally been a bellwether for the country around a lot of different progressive policies,” said Rebecca Smith, an expert on worker misclassification at the National Employment Law Project, which is part of a coalition seeking to enact a similar law in New York.

CreditRich Pedroncelli/Associated Press

Industry officials have estimated that on-demand companies like Uber and the delivery service DoorDash see their costs rise 20 to 30 percent when they rely on employees rather than contractors, and Uber and Lyft have said in statements to prospective investors that being forced to make drivers employees could significantly affect their financial outlook. Since the prospect of a deal started to fade in late July, the stock prices of both Uber and Lyft have declined about 30 percent.

Analysts said the stock decline was due in part to concerns about A.B. 5, among other worries about the businesses. “Probably the No. 1 question we get from investors right now is about the risks here, qualitatively and quantitatively,” said Lloyd Walmsley, an equity research analyst at Deutsche Bank. “There’s obviously the risk that California is just the beginning, that other states could follow suit.”

Ride-hailing companies contend that A.B. 5 would force them to set rigid schedules, depriving drivers of flexibility, and raise fares to cover the cost of employment benefits. The companies say that about 90 percent of their drivers nationwide do not work a full-time schedule.

But Tyler Sandness, a Lyft driver who is an organizer for a group called Rideshare Drivers United in Los Angeles, said the bill was needed because “things have gone from bad to worse” for drivers. As independent contractors, drivers must cover the costs of vehicle ownership and payroll taxes, and lack much of the safety net afforded to employees, including workers’ compensation and paid sick leave.

That California has come to the brink of fundamentally threatening such marquee companies is the culmination of miscalculations by Uber and Lyft, a strong show of force from organized labor, and legislators’ resistance to the intervention of the new governor, Gavin Newsom.

The ride-hailing companies sought an amendment to the bill that would create a special category for their drivers, between contractor and employee. Mr. Newsom’s office would not comment for this article, but three people familiar with the discussions said the governor gave the companies clear advice: Get labor to bless such an arrangement, or face insurmountable opposition in Sacramento.


CreditJim Wilson/The New York Times

The companies turned their attention away from lobbying against the bill in the Legislature in favor of laying the groundwork for a deal. They conferred frequently with the governor’s staff, according to legislative aides. And they met more than half a dozen times during the first half of the year with representatives from a few large unions, including the Service Employees International Union and the Teamsters, two people familiar with the discussions said. Some labor leaders felt that a deal could leave drivers for ride-hailing services with many of the employment protections under A.B. 5 while allowing them to join a labor organization, potentially expanding the unions’ ranks by tens of thousands.

The negotiations appeared to make progress. Two weeks after the bill passed the state’s lower house in late May, Uber’s chief executive and Lyft’s co-founders wrote a commentary for The San Francisco Chronicle laying out the terms of a possible agreement along these lines. Uber and Lyft executives believed that a deal was near and some discussed how to sell it to the Legislature, according to two industry officials.

But opposition that had been simmering for months within the labor movement soon began boiling over, prompting the service employees’ union and the Teamsters to first delay and then pull out of a meeting planned for July.

Labor officials used a four-week recess beginning in mid-July to consolidate opposition to any agreement watering down A.B. 5 for gig workers. The state’s building trades council, which represents construction workers, worried that exempting Uber and Lyft would pave the way for exemptions in other industries, including their own. The council sent a letter to the governor stating its opposition and urged other unions to join it. Within a few weeks, several other unions followed suit.

The governor’s office persisted. Mr. Newsom’s chief of staff, Ann O’Leary, a former top adviser to Hillary Clinton, had lunch with John Zimmer, the president of Lyft, and Tony West, Uber’s chief legal officer, to keep the discussions alive, according to people associated with all the parties.

Aides to the governor also began calling legislators like Assemblywoman Lorena Gonzalez, the A.B. 5 sponsor, to gauge her openness to a deal. “He absolutely wanted a compromise,” Ms. Gonzalez said of the governor. “I was very clear at that moment that I wasn’t looking to sell out workers.”


CreditJohn Francis Peters for The New York Times

After the Legislature returned in mid-August, there appeared to be one last chance for a breakthrough — not by carving Uber and Lyft out of the legislation, but by enacting a separate bill that would override portions of A.B. 5. A top state labor official circulated to colleagues an updated “rough concept draft” that could leave drivers short of full employee status, but give them a union that would bargain industrywide with the companies over wages and benefits and even allow them to strike.

The last week in August, a proposal from Uber with many of the same features was relayed to the State Senate’s bill writers. Lyft had put forth similar ideas.

To nudge forward unions that might be reluctant to endorse a deal they privately favored, Uber and Lyft announced that they would each kick in $30 million for a state ballot initiative next year to try to exempt their drivers from employment status if legislators didn’t do it first.

The governor appeared to pressure labor as well. The head of the state building trades labor council, Robbie Hunter, said he was left off a high-profile commission to study the future of work after receiving an invitation from the governor’s office. Mr. Hunter attributed the snub to his insistence on full employment status for gig workers.

“I was stunned,” Mr. Hunter said. “I do believe they thought I was going to change.”

He did not. On Labor Day, Mr. Newsom appeared to concede that the bill would pass without significant alterations for gig workers, and he endorsed A.B. 5 for the first time. But he urged the companies and labor officials to continue discussing ways “to build paths for workers in our state who want to join a union.”

An Uber spokesman, Matt Kallman, said on Monday: “We’ve engaged in good faith with the Legislature, the Newsom administration and labor leaders for nearly a year on this issue, and we believe California is missing a real opportunity to lead the nation.”

In some ways, the fight may have only begun, with Uber and Lyft likely to keep pushing for a separate measure scaling back some of A.B. 5’s impact in exchange for granting drivers the right to bargain with the companies. Anthony Foxx, Lyft’s chief policy officer, said, “We remain hopeful of reaching a solution that is good for drivers and builds a strong bridge with labor.” Such a bill could emerge from the Legislature next year.

“A.B. 5 is going to pass,” said State Senator Scott Wiener of San Francisco, Uber and Lyft’s hometown, who supports the bill. “But I’m confident this issue will be active in the Legislature for years to come.”


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Almost Every State Is Investigating Google for ‘Potential Monopolistic Behavior’

States Investigating Google’s Market Dominance | Time

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British Airways Is Canceling Almost Every Flight for 48 Hours Amid Pilot Strike

British Airways Cancels Almost Every Flight Amid Pilot Strike | Time

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Saudi Arabia’s King Has Replaced the Country’s Energy Minister With One of His Own Sons

Saudi King Replaces Energy Minister With One of His Own Sons | Time

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CVS, Walgreens, Wegmans Join Retailers Urging Customers Not to Openly Carry Guns in Stores

CVS, Walgreens, Ask Customers Not to Openly Carry Guns | Time

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