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Is the gig economy bill a disaster or triumph for ride-hailing? Depends on who you ask.

Uber and Lyft have been warning drivers about the end of flexible schedules, and passengers about more expensive rides that take longer to arrive, all thanks to a California bill that passed this week. 

But drivers and other gig workers are celebrating what could be a pathway to fair pay, benefits, and other employee rights, which some claim will come at only a slight cost to riders.

After the bill, called AB5, makes its way to the governor’s desk, it should go into effect on Jan. 1, 2020. It would make companies reclassify many independent contractors as employees, something Uber and Lyft have opposed. 

While this would directly affect drivers and other gig economy workers, like the 200,000 in California working for Uber, the people who use the apps could also see changes. 

The New York Times cited “industry officials” who say costs for companies like Uber and Lyft could rise by 20 to 30 percent because of AB5. Other industry experts like Michael Droke, a partner at Dorsey & Whitney in California, a law firm that has represented big companies like 3M and Wells Fargo in labor disputes, also sees costs going up for companies and prices going up for riders. 

“Many industries rely on independent contractors to deliver products and services, from food delivery to software coding and design. Those workers will be converted to employees, significantly increasing the cost of the products and services,” Droke said. 

Yaël Ossowski, deputy director of the Consumer Choice Center, which supports deregulation, said the law could force people to “seek out alternatives.” Instead of ordering a cheap ride, he thinks people will be forced to do things like carpool, hail a cab, or find a nearby bus. 

For Uber and Lyft driver Jeff Perry, AB5 is a huge win. He is part of Gig Workers Rising, which has been instrumental in gathering support for the bill and is fighting for drivers to unionize. 

He’s not concerned that Uber or Lyft will go out of business or that customers will turn to other options. He said passengers will understand potentially longer wait times and higher prices are a necessary sacrifice to help drivers. 

“It’s better than anything cabs can offer or public transit,” he said.

Perry thinks Uber and Lyft can innovate again in the face of a new employee structure and costs.  

“I don’t feel sorry in the least for Uber,” he said. “I don’t think this is as dire for them as they make it seem.”

He referenced an in-app message that Lyft sent out Wednesday morning in response to AB5 moving forward. He saw it as a last-ditch effort to get drivers to pressure California Gov. Gavin Newsom to veto the bill. 

Aside from somewhat longer wait times and higher fares, Gary Buffo, president of the National Limousine Association, which has supported better pay and benefits for ride-hailing drivers, doesn’t think Uber or Lyft need to paint AB5 as a disaster. 

He’s seen his industry survive while following standard labor practices for its drivers, so he believes these companies can handle it. 

“Nobody is going to see a big change at all,” he said in a call Wednesday. “Except Uber and Lyft drivers getting paid fairly.”

In Uber and Lyft’s IPO filings with the Securities and Exchange Commission earlier this year, the switch from independent contractor to employee is listed as potentially ruinous. 

“If the contractor classification of drivers that use our platform is challenged, there may be adverse business, financial, tax, legal and other consequences,” Lyft’s filing states. 

Uber clearly lists in a bullet point: “Our business would be adversely affected if Drivers were classified as employees instead of independent contractors.”

In a press call Wednesday, Uber’s chief legal officer Tony West said the ride-hailing company wants to give drivers organizing rights and minimum pay standards without forcing them to become employees. 

“We believe drivers are properly classified as independent,” he said, emphasizing driver flexibility. Uber plans to argue that its drivers can continue to use the platform as they always have. Combining forces with Lyft, Uber is backing a ballot initiative for California voters to set a separate ride-hailing driver policy. 

While unwilling to go into worst-case scenarios, West assured reporters that Uber would stick around. He even floated the possibility that nothing would change and AB5 wouldn’t raise costs or cause any structural changes. As Gig Workers Rising’s Perry said, there’s undeniable value in Uber and Lyft — it just needs to include the drivers that power the service. 

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