By Walt Hickey
Welcome to the Numlock Sunday edition. Each week, I'll sit down with an author or a writer behind one of the stories covered in a previous weekday edition for a casual conversation about what they wrote.
Last week, we chatted about what future there is for scooters and for the WeWorks of the world. This week, the second half of our conversation, which is all about a controversial new law in California called AB5, and gets at the key question of the sharing economy: what is work, who is a worker, what is owed to workers, and how do we make sure that they get what they deserve?
This interview has been condensed and edited.
You've moved to London and you're focusing a lot on the European scene, but one of the biggest things that happened stateside is the AB5 law in California. I have friends who are freelance journalists who are going through a really tough time with some of it, but the broader ambitions of the law were just to put a check on some sharing economy practices. Can you just go into what AB5 is and what the impact has been versus what they wanted it to be?
AB5 is this bill that California passed last year. Basically what it did was it took existing law based on a court decision about the tests used to determine whether someone is an employee or a contractor, and it codified that.
A lot of people think AB5 changed the law, and it didn't really do that. It just said, “Hey we have this court decision that is the law and now we're formally writing it into the law.”
It's more that the court decision wasn't being actively enforced, Really what AB5 is, was it created a bunch of carve outs to the court decision because in the process of writing the law, a lot of different types of workers were exempted from the law who would have — under the court decision — been included in that.
That’s what the Ubers of the world were trying to get done. They were trying to get themselves a carve out and they failed to do that. What it functionally does is there are various steps the government uses to assess whether a worker should be considered an independent contractor — who has more flexibility, but is not eligible for certain labor protections, a minimum wage, unemployment insurance, that sort of thing — or if they are, in fact, an employee who is entitled to those benefits. And it formalized a tougher cap.
Some of the impact has affected freelancers. Is there any shift on that coming or is this the law as it is?
The really tough thing about AB5 is that it's not necessarily a good solution, right? You have this big existential problem, which is that there are people who are being exploited and classified as contractors and denied rights and benefits when they should be treated as employees. But then you have a lot of people who might also under certain legal changes be considered employees when they really would like to be freelancers and independent contractors. And it's very hard to draw that line because you can't just go up to every person and be like, “what would you like to be an independent contractor or an employee? Please check here.”
It doesn't work that way. So what you're seeing is there's a lot of collateral damage. There are a lot of people who were happy as contractors and now because the law has changed, they're being classified as employees and their companies have let them go or are cutting back their hours. All these sorts of problems. Uber drivers are not independent from this because there are a lot of drivers who work very few hours a week and feel strongly that they do not want to be an employee with a schedule.
I think AB5 will be tied up in litigation for a really long time. And it's hard to say when, if ever, it would truly be enforced.
I also think it's missing the point a little bit.
It's not that people care if they're a contractor or employee, people care if their job is fitting their financial and life needs. A lot of gig — especially Uber and Door Dash — types of workers, their complaint is they're not making enough money. And making them an employee won't necessarily help them make more money.
So it's a misdirected solution. I think it's good in that it started the conversation, and it's gotten the government involved in a conversation that before was very theoretical, and in a way it's better to do something than to do nothing. But this probably isn't where we'll end up.
I am more of a proponent, personally, of the rules that New York passed. New York figured out this clever way to essentially create a minimum wage for a group of workers who historically haven't been entitled to a minimum wage.
Oh please go on, this is great.
It passed in December 2018 and then it took effect I think in February 2019 and so basically what New York City did was they said: We are sidestepping this whole thing about employee, independent contractor, whatever. But what we're concerned with is that drivers aren't making enough money. So you, companies, we want you to pay everyone a wage that is equivalent to $15 an hour when adjusted with expenses and stuff, and we want that wage to apply only to time that drivers are actually working, and not the time that they're waiting for a trip.
They were very clever, and they basically created this formula that took into account minutes and miles, like a typical taxi meter, but then put a divisor on it that they called the utilization rate.
It was basically like saying (and I’m making this number up), “Uber, You're only utilizing your average driver for 55 percent of every hour. When you do this wage formula that has to come out to $15 an hour, we are dividing it by 0.55.”
And what's clever about that formula is that one, it helps people get paid more without dealing with this question of whether they're contractors and, two, New York is also very worried about congestion, and the way the formula is constructed, it incentivizes companies to have a higher utilization rate. Because if your utilization rate is 100 percent, you're just dividing by one, so you don't have to pay out more money adjusting for underused workers. So it aligns those incentives very cleverly.
Now you're seeing several other cities look into developing minimum-wage type legislation for ride-share drivers similar to what New York did. You're seeing that in Seattle, Los Angeles, I think maybe Chicago, they might just be doing it. I think what you might see with AB5 in California is that while the law is mired in litigation, in the meantime you might see individual cities take up measures more like this.
Yeah, that's nice. It's the classic laboratory of democracy stuff and I think that it was really interesting how you put it that, listen, the law in California is not great, but as an opening salvo at least to get everybody talking, that doesn't seem the worst thing in the world.
This is really, really informative, easily the most nuanced take that I've heard on this so far.
Thank you, I try.
You can find Ali at Quartz and her personal newsletter Oversharing, which is more than you wanted to know about the sharing economy
Photo by Joseph Miguel
If you have anything you’d like to see in this Sunday special, shoot me an email. Comment below! Thanks for reading, and thanks so much for supporting Numlock.