AB5 threatens the existence of gig companies like Uber & Lyft

Yesterday, Gizmodo reported that AB5, a bill that is aimed to force gig companies to treat their workers as employees instead of independent contractors as they are now, passed California’s Senate Appropriations Committee and will go to a full vote in the Senate next month. If passed, it is expected to be signed into law by the Governor.

AB5 stems from a decision by a California Supreme Court decision in 2018, which essentially decrees that “Workers must be treated as employees, not independent contractors, if their jobs are central to a company’s core business or if the bosses direct the way the work is done.”, according to LA Times. According to the ruling, ride-hailing businesses cannot exist without drivers and drivers have to follow certain standards to be able to operate on their platforms. Hence, they should be treated as employees.

Ride-sharing companies exist as middlemen between riders and drivers, managing the supply of drivers and demand for rides. Drivers no longer have to drive around to pick up riders. Surge pricing gives drivers incentives to go out at unpopular hours like early in the morning. The argument that these companies make against AB5 is that drivers have flexibility to choose when and where to work, and as a result, shouldn’t be classified as employees. Well, even as employees, drivers can surely negotiate with Uber or Lyft that right. One of my colleagues moved from Omaha to Austin to work remotely so that she can be with her husband. What is at stake here is the bottom lines.

Gig companies like Uber or Lyft haven’t made any money despite treating their workers as independent contractors. If the proposal is signed into law, it will mean higher operational costs as these companies will need to pay minimum wages and be responsible for other benefits to their employees. Any chance of profitability will become even slimmer.

To be fair to Uber and Lyft, what they have done so far is perfectly legal as up to now there is no law that regulates the industry. They just take advantage of the situation and the bargaining power that they have over drivers. On the driver side, each cannot fight with these companies. They need lawmakers.

Regarding lawmakers, they have reasons to help both drivers and ride-sharing companies, especially in the US. Regulators that are more concerned about the well-being of drivers, their constituents as well, will support proposals such as AB5. Those who are more concerned about the power of lobbyists and about staying in power will fight against AB5. Since California is a progressive state, there seems to be more proponents than opponents of AB5. I am not sure the same can be said in other less progressive states or the federal administration.

Neither am I sure that collectively laws such as AB5 will benefit our society, but personally I am for it. Drivers should be protected against the abuse of these gig companies. Eventually, it has been proven that there is demand for services such as Uber or Lyft. I am confident there will be startups wanting to tap into the demand. As for Uber or Lyft, they will either adapt and innovate to survive and thrive or fall into the category of “thanks for being the trailblazers, but perhaps your time is up” companies.

California’s attempt to increase diversity in the boardroom

California may reportedly be the first state in the country that requires a publicly listed company to have female members in its Board of Directors to a certain extent. The bill, if passed, is aimed to improve the gender diversity as women are absent at the board level of 25% of the public traded companies. While the move may have a good intention, I doubt that it’s necessary.

Gender equality has received a tsunami of attention in the past couple of years with the #Metoo and feminism movements. Speaking of businesses alone, we have a lot of female leaders in various industries nowadays such as Marissa Mayer, Sheryl Sandberg, Indra Nooyi, Diane Greene, Stephanie McMahon, Dhivya Suryadevara – the new 39-year-old CFO of GM or the first ever black female CEO of BP, stationed in South Africa, – Priscillah Mabelane, just to name a few. Then we have Angela Merkel or Michelle Obama in politics, Serena Williams in sports or Miley Cyrus and Alicia Keys in entertainment, just a few examples. The best way to ensure the gender equality, in my opinion, is to treat each gender equally, keep the narrative going to avoid complacency and return to the status quo, and encourage girls or female professionals that they can achieve the same as their male counterparts without the relying on social pressure. Those wonderful female leaders, among so many others around the world, should give them hope and inspiration.

The bill by California’s government may create backlash as companies may argue that a female candidate is only chosen over a male peer simply to avoid a regulatory fine. In reality, an appointment decision varies from one case to another. Nonetheless, the bill, if passed, may unnecessarily leave a taint on a female’s appointment.

The gender scale should be balanced, on its own. Sure, it has been tipped to one side for far too long (I personally benefited from the inequality), but it’s a good thing that things are naturally heading towards equilibrium. Forcefully tipping the scale to the other side in the name of equality may not be any different from the male dominance in the past. In other words, how would a female professional feel if she was hired only because of the law and not because of her qualifications? Personally, I believe that fairness trumps unnecessary partiality.

Females are more empowered than ever. Unfortunately, there are still industries and companies with gender inequality, but the tide will go against them soon. I believe that those companies will soon realize that they cannot afford the inequality anymore and that gender equality is for their own good.